Maximizing your health and wealth with Health Savings Accounts

You may have heard of a Health Savings Account. Owning this kind of account can be a wise step toward financial stability. A Health Savings or HSA is a tax-advantaged savings account designed to help individuals and families cover qualified medical expenses. Here are some compelling reasons why HSAs are important:

Triple Tax Benefits: Contributions to your HSA are tax-deductible, the growth of your account is tax-free, and withdrawals for qualified medical expenses are also tax-free. This trifecta of tax advantages can significantly boost your savings.

Flexibility: You have control over how you invest and spend your HSA funds. You can choose from various investment options, and there's no "use it or lose it" rule; unused funds roll over from year to year. Your HSA stays with you if you change employers or leave the workforce.

Financial Security: HSAs act as a safety net for unexpected medical expenses such as deductibles, treatments not covered by insurance, or copays. By saving regularly, you can better cope with medical costs and avoid going into debt.

While there are many benefits to opening an HSA, you should be aware of the federal regulations on this financial wellness tool.

Eligibility: To open an HSA, you must be covered by a High Deductible Health Plan (HDHP). Not all HDHPs qualify, so it's essential to verify with your insurer. You cannot be enrolled in Medicare. You cannot be claimed as a dependent on someone else’s previous year tax return.

Contribution Limits: The IRS sets annual contribution limits. For 2023, the limits are $3,650 for individuals and $7,300 for families. Individuals aged 55 or older can make an additional $1,000 catch-up contribution.

Qualified Expenses: HSAs are intended for medical expenses, including doctor's visits, prescription medications, and other eligible healthcare costs. Be sure to keep records and receipts. HSAs do not cover a normal pet’s veterinary care but may be used to pay for the healthcare costs of service animals as those expenses are related to people’s disabilities.

Tax Reporting: When you file your taxes, report your HSA contributions and withdrawals accurately. This helps ensure you receive the tax benefits you're entitled to.

HSAs are not only a powerful financial tool for managing healthcare costs but also an excellent way to build wealth and financial security. At Alive Credit Union, we encourage our members to consider opening an HSA to take advantage of the tax benefits and the financial flexibility it offers. If you have any questions or need assistance with setting up an HSA, please contact our knowledgeable staff. We're here to help you make the most of your financial journey.

Sources - IRS