Health Savings Accounts
From SmartMedicalConsumer Wiki
Health Savings Accounts (HSAs) were created by the Medicare bill signed by President Bush on December 8, 2003 and are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis. US Treasury Health Savings Accounts
An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual. Contributions, other than employer contributions, are deductible on the eligible individual's return whether or not the individual itemizes deductions. Employer contributions are not included in income. Distributions from an HSA that are used to pay qualified medical expenses are not taxed.
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[edit] What is it?
A health savings account (HSA) is a tax-exempt trust or custodial account that you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA.
No permission or authorization from the IRS is necessary to establish an HSA. When you set up an HSA, you will need to work with a trustee. A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. The HSA can be established through a trustee that is different from your health plan provider.
Your employer may already have some information on HSA trustees in your area.
If you have an Archer MSA, you can generally roll it over into an HSA tax free. See Rollovers, later.
For more information, see the IRS publication 969 (2008) "Health Savings Accounts and Other Tax-Favored Health Plans"
[edit] What are the benefits of an HSA?
- 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. See Qualified medical expenses, later.
- An HSA is “portable” so it stays with you if you change employers or leave the work force.
[edit] Qualifying for an HSA
To be an eligible individual and qualify for an HSA, you must meet the following requirements.
- You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.
- You have no other health coverage except what is permitted under Other health coverage , later.
- You are not enrolled in Medicare.
- You cannot be claimed as a dependent on someone else's 2008 tax return.
Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers).
If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse's coverage does not cover you.
If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an HSA contribution. This is true even if the other person does not actually claim your exemption. Each spouse who is an eligible individual who wants an HSA must open a separate HSA. You cannot have a joint HSA.
[edit] What's new in 2008
High deductible health plan (HDHP). For HSA purposes, the minimum annual deductible of an HDHP remains at $1,100 ($2,200 for family coverage) and the maximum annual deductible and other out-of-pocket expenses limit increases to $5,600 ($11,200 for family coverage).
Limit on contributions. The maximum HSA contribution increases to $2,900 ($5,800 for family coverage). The maximum additional contribution for individuals age 55 or older increases to $900.
For more information, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.
[edit] What's new in 2009
High Deductible Health Plan (HDHP).For HSA purposes, the minimum annual deductible of an HDHP increases to $1,150 ($2,300 for family coverage) and the maximum annual deductible and other out-of-pocket expenses limit increases to $5,800 ($11,600 for family coverage).
Limits on contributions.The maximum HSA contribution increases to $3,000 ($5,950 for family coverage). The maximum additional contribution for individuals age 55 or older increases to $1,000
