Health Savings Account (HSA)
A tax-advantaged savings account for people with high-deductible health plans to pay for qualified medical expenses.
What is Health Savings Account (HSA)?
A Health Savings Account (HSA) is a special savings account that lets you set aside money pre-tax to pay for qualified medical expenses. Unlike other health accounts, the money in your HSA is yours to keep forever - it never expires and goes with you if you change jobs.
HSAs offer a triple tax advantage that makes them one of the most powerful savings tools available: contributions are tax-deductible, investments grow tax-free, and withdrawals for qualified medical expenses are tax-free. No other account in the U.S. tax code offers all three benefits.
To open an HSA, you must be enrolled in a High-Deductible Health Plan (HDHP) and cannot be claimed as a dependent on someone else's tax return. Once you turn 65, you can withdraw money for any purpose without penalty - though non-medical withdrawals are taxed as income.
Frequently Asked Questions
Who can open an HSA?
Anyone enrolled in a High-Deductible Health Plan (HDHP) who isn't claimed as a dependent and isn't enrolled in Medicare can open an HSA.
Does HSA money expire?
No. Unlike FSAs, HSA funds never expire and roll over year after year. The money is yours forever.
Can I invest my HSA money?
Yes. Most HSA providers offer investment options. Your investments grow tax-free, making HSAs powerful retirement savings tools.
Related Terms
High-Deductible Health Plan (HDHP)
A health insurance plan with a higher deductible and lower premiums that qualifies you to open an HSA.
Triple Tax Advantage
The three tax benefits of HSAs: tax-deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses.
Qualified Medical Expense
Healthcare costs that can be paid or reimbursed tax-free from your HSA, as defined by the IRS.
Contribution Limit
The maximum amount you can contribute to an HSA in a calendar year, set annually by the IRS.
Related HSA Expenses
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Track your HSA expenses
Now that you understand the terms, put your knowledge to work. Track expenses and reimburse yourself tax-free.
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