A Health Savings Account (HSA) is exactly what it sounds like, a savings account that can be used for certain medical expenses.  Its many benefits include:

  • Tax deductible contributions

  • Tax-free growth of funds in account

  • The balance can be carried over each year

  • Withdrawals for approved medical treatments are tax free

An HSA can be a good idea for many people, especially if you have an employer who will make contributions to your account.  As of 2017, you can contribute $3,400 annually to an individual HSA or $6,750 if it is a family plan.

With its many benefits, HSAs do have some drawbacks:

  • Must be enrolled in HSA qualified health plan

  • Cannot be claimed as a dependent on another person’s taxes

  • Cannot be enrolled in Medicare or Medicaid

  • Must be enrolled in a Qualified High Deductible Plan

The Qualified High Deductible Health Plan (HDHP) may prevent some people from pursuing an HSA. With the HDHP you, the insured, will be required to pay for all medical expenses except for preventative care until the deductible limit is reached.  This can translate into paying much more for medical services than if you had another plan. For 2017, the minimum deductible for a HDHP for an individual is $1,300 with a the max capped at $6,550.  Funds from an HSA can be used to pay these deductibles.