Understanding HSAsYou are eligible for an HSA if you meet all four of the following qualifying criteria:
- You are enrolled in a qualified high-deductible health insurance plan (known as a “HDHP”).
- You are not covered by any additional health plan.
- You are not eligible for Medicare benefits.
- You are not a dependent of another person for tax purposes.
Here are some pros and cons of this product:
- HSAs offer a significant annual tax deduction, making them particularly appealing to individuals in higher tax brackets.
- Withdrawals for qualifying health care costs (including long-term care insurance) are tax free.
- Investment income in HSAs is also tax free.
- Since HSAs must be tied to HDHPs, their ultimate savings must be weighed against how such plans stack up against more traditional plans, which may offer significantly better coverage.
- HSAs may not offer the flexibility and transportability that today’s mobile American family requires, especially given that health plan offerings differ significantly from employer to employer and many smaller institutions have yet to offer an HSA option.
- For more information on HSAs, see the U.S. Treasury’s Health Savings Account resource page.
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