Health Savings Account (HSA): How HSAs Work, Contribution Rules

A Health Savings Account (HSA) is a tax-advantaged account for individuals with high-deductible health plans (HDHPs) to save for medical expenses. Contributions are made by individuals or employers and can be invested over time. HSA funds can cover qualified medical expenses tax-free. To be eligible, individuals must meet IRS requirements, including having an HDHP and not being enrolled in Medicare. Contribution limits apply, with catch-up options for those 55 and older. An HSA can be funded by individuals, employers, and even family members. HSAs offer tax advantages but come with rules on qualified expenses and potential penalties for non-medical withdrawals. Unlike Flexible Spending Accounts (FSAs), HSA funds can roll over annually and be invested. It's crucial to research and select the best HSA option to suit individual needs for future medical expenses.