Healthcare can be one of the priciest yet essential parts of life’s journey. And yet, many struggle to utilize the financial tools that may help. Take Health Saving Accounts (HSAs), for example.
In 2019, 55% of those with HSAs that did not record a distribution also did not receive either employee or employer contributions. This suggests that the lack of distributions are due to account holders becoming disengaged from their accounts, rather than not having access to this cost-saving financial tool.1
And yet, for those looking to help manage the financial impact of healthcare, a Health Savings Account (HSA) may be just the ticket.
HSA Tax Benefits
Additionally, unlike a Flexible Spending Account (FSA), which is funded with pretax dollars but must be used by a specific deadline, HSA contributions can remain in your account to be used for future medical bills at any time. In short, this means there is no “use it or lose it” penalty.2
Keep in mind that if you spend your HSA funds for non-qualified expenses before age 65, you may be required to pay ordinary income tax as well as a 20% penalty. After age 65, you may be required to pay ordinary income taxes on HSA funds used for non-qualified expenses. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states.
HSA Contribution Limits for 2022
These adjustments are rounded to the nearest $50 to account for inflation rates, which are determined using the Consumer Price Index for All Urban Consumers.3
How to use your HSA
1. EBRI.org, January 21, 2021
2. Marketwatch.com, March 17, 2021
3. IRS.gov, May 2021
4. IRS.gov, September 10, 2021
Health Savings Account
September 28, 2021