HSA Benefits

  • Employer contributions to your HSA are NOT included in income
  • Tax-preferred treatment of money used towards qualified medical expenses
  • Individuals beyond the eligible HSA individual can contribute the account, such as family members
  • Interest or earnings on the HSA account are tax-free
  • Contributions in the account can remain until they are used; unused (and not withdrawn) amounts carry over to the following year
  • The HSA can transfer if the taxpayer changes employers

HSA Requirements

  • Must be setup through a trustee
  • Distributions must be used for qualified medical expenses, otherwise they are taxed upon withdrawal and may also be subject to penalty (20% penalty unless over age 65)
  • The taxpayer must have a high-deductible health insurance plan as of the 1st day of the last month for his/her tax year to setup and maintain an HSA for that year
  • To qualify as a high-deductible insurance plan, the taxpayer or family must meet a minimum deductible ($1,300 individual or $2,600 per person within the family plan); the individual or family plan must also be lower than the maximum annual deductible and out of pocket expense threshold ($6,550 individual and $13,100 family)
  • May not exceed maximum contribution (For 2016, Individual is $3,350 and Family is $6,750; increased contribution of $1,000 allowed if age 55 or older)
  • A taxpayer cannot be enrolled to receive Medicare benefits and continue to maintain his/her HSA account
  • The taxpayer cannot deduct an HSA contribution if she/he is eligible to be claimed as an exemption on someone else’s tax return (even if that exemption is not actually claimed)
  • Spouses must have their own HSA accounts, as there are no joint HSAs