Health savings accounts are just like savings accounts except that the money you save is used to pay for your medical expenses.
What are the Advantages of a Health Savings Account?
There are many advantages to using a health savings account that people don’t know of. Here are the benefits you get by setting up your own health savings account:
- Others can contribute to your account: This may be one of the best benefits of HSA. Your employer, friends and family can deposit their contributions to your account for your healthcare.
- Funds roll over to the next year: You don’t need to worry if your funds in the HSA are left at the end of the year. The remaining funds will simply be rolled over to the next year, so you can rest easy knowing that your money is there when you need it to pay your medical bills.
- Pre-tax contributions: If your employer deposits money through payroll deposits, they will be with pre-tax money, so these contributions will not be liable to tax.
- Withdrawals are tax-free: If you withdraw money from your health savings accounts to pay for your medical expenses, the money will not be charged with federal (or, in most cases, state) income taxes.
- All earnings from HSA are tax-free: The interest of your health savings accounts are not subject to any kind of taxes and neither are the any other earnings or assets in the account.
- The account is extremely convenient: Most of the health savings accounts issue debit cards, so that if you need to pay for prescription bills immediately, you won’t need to go through the hassle of withdrawing money first, and take care of the bills right away. In addition to this, if you wish to receive your bill in the mail, you can simply make the payment over the phone using your debit card after calling the billing centre. You can also use this debit card to draw money from the ATM.
What Expenses are Covered by a Health Savings Account?
There are many expenses that are covered by a health savings account. You can find the whole list in the IRS Publication 502, Medical and Dental Expenses. However, some of the most common expenses covered by an HSA are listed below:
- Therapy or counselling
- Telephone equipment for the visually or hearing impaired
- Psychiatric care
- Prescription medications
- Nursing services
- Lab fees
- Hospital services
- Hearing aids and batteries
- Fertility services
- Eye exams, glasses and surgery
- Doctor’s fees
- Diagnostic services
- Dental treatments
- Contact lens supplies
- Ambulance services
- Alcoholism treatment
Is It Good for Me?
You need to think carefully before getting a health savings account. Though it offers a huge number of benefits, there are some drawbacks that are not feasible for everyone.
If you are okay with a high deductible, and can save medical receipts responsibly, then you should definitely go for an HSA.