Health Savings Accounts (HSAs) are designed to give consumers more control over their health coverage, enabling them to choose their own doctors and shop around for the best deal on other services and procedures while receiving tax breaks at the same time.
To enroll, you must be covered by a qualified "high deductible" health insurance policy (HDHP). For 2009, a high-deductible health plan is defined as a health plan with an annual deductible that is not less than $1,150 for self-only coverage, or $2,300 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $5,800 for self-only coverage or $11,600 for family coverage. In addition, you cannot be covered by any other health insurance plan, such as a spouse’s plan. Another requirement to enroll in an HSA: you must be younger than age 65 and cannot be claimed as a dependent on someone else’s federal income tax return.
HSA contributions for 2009 are limited to $3,000 for taxpayers with individual HDHP coverage, and to $5,950 for taxpayers with family HDHP coverage. If you’re age 55 and older, you can contribute an additional $1,000. You will be able to deduct your contributions to your HSA, and the account earnings will accumulate on a tax-deferred basis.
You can withdraw the money tax-free and penalty-free at any time and use it to cover a variety of medical costs, including:
o Diagnosis and treatment of disease
o Routine medical visits
o Prescription drugs, and some non-prescription drugs
o Eye care
o Dental care
o COBRA premiums
o Acupuncture
o Braille books
o Midlife services
o Seeing-eye dogs
o Qualified long-term care services
o And more
Unlike an employer’s flexible spending account that enforces a "use it or lose it" rule, you can roll over money saved in an HSA from year to year.
Article provided courtesy of Option 1 Credit Union. Copyright 2009 Credit Union National Association Inc. All rights reserved.
