It’s certain that the next few years will see some significant changes in the American health insurance system. With price fluctuations and carriers coming in and out of the market, it’s been difficult for families to budget. Currently, there is one program that will help you reduce monthly fees and get a tax break: Health Savings Account (HSA). Here’s what you need to know about HSAs, and how they’re changing in 2017.
What is a Health Savings Account?
An HSA is a way of putting money towards your potential healthcare costs — Your deductibles, out of pocket expenses, and other costs associated with your health insurance plan. One of the best things about the HSA, is that money deposited into it is tax deductible — Any money you put into your HSA comes off of the total amount due for federal, state, and certain other taxes.
Can HSAs be used with any health insurance plan?
No, HSAs only apply to certain qualified health insurance plans. These are plans generally classed as providing “catastrophic” cover. These types of plans, also known as “High Deductible Health Plans (HDHPs),” typically have higher deductibles and out of pocket costs than more comprehensive plans. You should always double-check that your health insurance plan allows HSAs.
Can HSAs be used for dental and vision?
Yes, in some circumstances HSAs can pay for out of pocket costs for dental and eye care. Check your HSA and health, vision, or dental insurance plan to find out what’s covered.
How much can be contributed to an HSA in 2017?
The maximum amount of money that can be put into an HSA in 2017 is:
- For individuals — $3,400.
- For families — $6,750.
The minimum deductibles for HSA enabled health plans are:
- For individuals — $1,300.
- For families — $2,600.
The maximum out of pocket costs for HSA enabled health plans are:
- For individuals — $6,550.
- For families — $13,100.
What happens if I pay for medical expenses not covered by the plan?
If you use your HSA to pay for medical expenses that aren’t allowed under the HSA or your health plan, you will typically pay a tax penalty of an additional 20% on any money used from your HSA account. Additionally, that money will also be liable to income tax.
Does money in an HSA roll over from year to year?
Yes. Funds in an HSA do roll over, so long as you stay on an HSA qualified health plan.
Does an HSA cover my adult children?
Yes, in some cases. If your child is under 26, and you claim them on your tax return then generally you can pay for their medical expenses from your HSA.
Are there other limitations on having an HSA?
Yes. In addition to being on an HSA qualified health insurance plan, the following must also be true:
- You cannot be enrolled in Medicaid or Medicare.
- You cannot have a general purpose flexible spending account (FSA).
- You cannot be claimed as a dependent on someone else’s tax return.
- You cannot be enrolled in any other non-HSA qualified health insurance plan.
Health savings accounts can be a good option if you have a qualified health insurance plan. They’re a way to put aside money to protect your family from unexpected medical expenses while avoiding tax payments on those deposits. In short, an HSA can give you some peace of mind, and let you keep more of your hard-earned money. At Litchfield Bancorp, our Health Savings accounts are FREE and you earn interest. Contact us today for more information!
For more information on HSA rules and regulations, please visit the IRS’s website by clicking HERE.
Stephen Yonych Jr.
Assistant Vice President, Watertown Manager