HSA (Health Savings Accounts)

A health savings account (HSA) is a tax-exempt trust or custodial account that you set up with a qualified HSA trustee to pay for or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA.

To qualify for an HSA, you must have a high deductible health plan (HDHP). You must have no other health coverage. You must not be enrolled in Medicare and you cannot be claimed as a dependent on someone else's tax return.

The benefits of an HSA are that you can claim a tax deduction for contributions you, or someone other than your employer make to your HSA even if you do not itemize your deductions on form 1040. Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income. The contributions remain in your account from year to year until you use them. The interest or other earnings on the assets in the account are tax-free. Distributions may be tax free if you pay qualified medical expenses. Finally, an HSA is "portable" so it stays with you if you change employers or leave the work force.