A Health Savings Account (HSA) is a tax-exempt account established solely for the purpose of paying out-of-pocket qualified medical expenses for you and your family when covered under a high-deductible health plan (HDHP). The funds are managed and controlled by you without restrictions of healthcare professionals and facilities. These funds can be rolled over year after year allowing you flexibility to manage routine as well as unexpected healthcare expenses. And like most retirement accounts, your HSA follows you if you change employment.
A person is eligible to make or receive an HSA regular contribution if within any month you:
Are covered under a HDHP* on the first day of the month;
Are not covered under another type of health plan that is not a HDHP (with certain exceptions for plans providing certain limited types of coverage);
Are not entitled to benefits under Medicare (generally, have not reached age 65); and
Are not claimed on another person’s tax form as a dependent.
*A HDHP plan must have a deductible of at least $1000 for individual coverage or $2,000 for family coverage. These amounts are subject to cost of living adjustments.
By meeting the eligibility requirements, you, your employer, and/or your family members can contribute to your HSA. It makes no difference if you are self-employed or unemployed. Frequency of contributions is at your discretion.
How much can be contributed to my HSA per calendar year?
The maximum annual contribution to an HSA is the sum of the limits determined separately for each month, based on status, eligibility and health plan coverage as of the first day of the month. The annual amount for eligible individuals with self-only coverage is generally the lesser of 100 percent of the annual deductible under the HDHP (minimum of $1,000) but not more than $2,600. The annual amount for family coverage under a HDHP is generally the lesser of 100 percent of the annual deductible under the HDHP (minimum of $2,000) but not more than $5,150. Additionally a catch-up contribution is available for eligible individuals who have reached age 55 by the end of their taxable year but have not reached age 65.
Contributions to an HSA are fully deductible; the earnings grow tax deferred, and distributions for qualified medical expenses are tax-free. Please consult with your investment and tax advisor for guidance.
Home Federal Bank will provide a VISA® Checkcard which provides you instant access to your HSA funds. This card has the ability to be used wherever VISA® Checkcards are accepted. You also have an option to purchase checks.
How do I claim the federal tax deduction for my HSA contribution?
Contributions made by you, and by family members on your behalf, which do not exceed the maximum annual contribution amount, are deductible by you when determining your adjusted gross income for your federal income tax return. You cannot deduct employer contributions, and these contributions will not count as wages for federal income tax purposes.
When can I make my HSA contributions and is there a deadline for contributions to an HSA for a taxable year?
Regular and catch-up contributions for the taxable year can be made in one or more payments, at the convenience of the individual or the employer, at any time prior to the time prescribed by law (without extensions) for filing the eligible individuals federal income tax for that year, but not before the beginning of that year. The due date for most taxpayers is April 15.
Distributions from your HSA used exclusively to pay qualified medical expenses for you, your spouse, or your dependents are excludable from gross income. Any other distributions not used exclusively to pay qualified medical expenses for you, your spouse, or your dependents are includable in your gross income and are subject to an additional 10 percent tax on the amount includable, except in the case of distributions made after your death, your disability, or your attainment of age 65.
If your spouse is the beneficiary of your HSA, the HSA becomes his/her HSA. If the beneficiary is not your spouse, the HSA ceases to be an HSA as of the date of your death. Home Federal will distribute the balance of the HSA and report the distribution to the IRS.
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