Health Savings Accounts Put You in Control of Your Healthcare

We all know that dealing with healthies is not always easy, but what can you do to ensure that you're in control of your healthcare? Health Savings Accounts (HSAs) provide a way for people to manage their own healthcare. With an HSA, you control the amount of money you put away and the type of care that you get. You won't be stuck with high deductibles or copays simply because your insurance doesn't cover everything, and if your health changes or it becomes more expensive to stay healthy, you can take care of those problems on your own. HSAs are a great way for people to have a little bit more control over their finances and how they spend their money on medical care.

What is an HSA?

Health Savings Accounts are accounts that you use to save money for medical care. They are funded with pre-tax dollars, which means that you won't pay taxes on the money you put in your HSA as long as it is used for medical expenses. Regardless of whether or not you have a high deductible health plan, if you want to take advantage of HSAs, it's important that you carry a High Deductible Health Plan (HDHP). HDHPs usually have lower premiums than other types of plans and if you make sure that you only use your HSA for approved medical expenses, such as copays and deductibles, your contributions will remain tax-free. If you're self-employed, you can contribute even more to your HSA if you make a profit and can use up to $5000 per year for premiums.

What Medical Expenses are Tax-free with an HSA?

Not all expenses are tax free if they're made with an HSA. If you have an HDHP and make contributions to an HSA that are used for qualified medical expenses, you won't pay taxes on it when it's withdrawn from the account. Qualified medical expenses include copays and deductibles, but not prescriptions or over the counter drugs. To qualify as a medical expense, you have to show that the item or service is medically necessary. Your doctor's visit might be necessary, but if your prescription is not considered medically necessary, you'll have to pay taxes on those expenses when you withdraw them from your HSA.

What if I Don't Have an HDHP?

If you don't have a High Deductible Health Plan, you won't be able to contribute your pre-tax dollars into an HSA and the money you put in will not be tax free. If you're working with a lower income and can't afford the HDHP premiums, there are other options for savings care that won't disqualify you from contributing to an HSA. You can still save money tax-free if you use a Health Savings Account, but you'll have to make sure that the funds are used for qualified medical expenses.

How Do I Save on my Medical Care?

In order to take full advantage of an HSA, you'll need to save money in your account. The easiest way to do this is with a Flexible Savings Account (FSA). This type of account allows you to contribute pre-tax dollars and save money for medical expenses yourself. You can use it whether or not you have an HDHP, so it works well if you're just starting out in life and don't have the ability to make big contributions each month. You can open an FSA with a bank, credit union or another financial institution. Once you've put money in your account, you'll be able to write a check to any medical provider and have the funds be available right away for the expenses. The money can also be withdrawn cash-like or used to pay off bills such as rent, utilities and other necessities. You'll need to keep track of your spending and withdrawals in order for this method to work well.

What if I Get Sick?

If you're self-employed and want more control over your healthcare expenses, you can have the same flexibility with an HSA as people who are covered by an HDHP if you make more than $50,000 per year. If you make more, you can contribute the difference between what you paid and what your policy would have paid into your HSA. For instance, if you made $75,000 and had a $5,000 deductible, you would contribute $1550 each year and be able to spend it tax free if it's used for eligible medical expenses.

If you aren't self-employed but still want to make less costly choices when it comes to healthcare, an HSA is a great way to get started. You can open an FSA or go with an HDHP and contribute as much as you're able towards your savings account each year. Whether you have a health plan or not, you can take control of your healthcare and learn how to manage your finances and your medical care.

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