Smart Cents

Do Health Savings Accounts (HSAs) cause you to scratch your head? Don’t fret - we have a handy breakdown of the benefits of Health Savings Accounts, eligibility, and tips for how your money can work best for you. 

HSA Benefits

• Tax Advantages: While you should always confirm with a tax professional, HSAs generally have tax advantages like contributions being tax-deductible, qualified withdrawals are tax-free, and. any interest on the funds grow tax deferred.
• Funds don’t expire: Unlike Flex or FSA spending plans your HSA funds roll over year after year which makes it easier to save for unplanned medical expenses.
• Flexibility: You can use your HSA funds for a wide range of medical expenses including deductibles, co-pays, and you can even shop at HSA stores for basic first aid, hygiene products, or over-the-counter medications. If it’s a qualified medical expense, you can pay for it with your HSA.
• Your contributions can grow: Want to get more from your funds? You can open a Health Savings Certificate of Deposit (CD) to earn higher fixed interest rates which help your medical rainy day fund grow. But remember these funds are locked in for the CD period and cannot be removed without penalty, so keep a Health Savings Account for those immediate expenses and put excess funds into the CD!
• You can take it with you: changing jobs or medical insurance providers? You can take your HSA with you, which is convenient.
• Comes with a debit card: Enjoy easy access to your account and a convenient way to pay for qualified medical expenses.

HSA Eligibility

Most adults under the age of 65 who aren’t enrolled in Medicare and are covered under a high- deductible plan (HDHP or PPO plan) will qualify for an HSA. Once enrolled in Medicare, you cannot make contributions to an HSA but you can continue to use your account to pay medical expenses until the account is depleted. If you aren’t sure, a tax provider can help you determine your eligibility and your friendly D.L. Evans Bank team is happy to provide more information about our HSA accounts.

HSA vs FSA

Health Savings Accounts and Flexible Spending Accounts (FSAs) are easy to get confused with one another. Both have tax benefits* and both are a way to dedicate money for medical expenses.

The biggest differences between the two are that to use an HSA you need to be on a high-deductible health insurance plan whereas an FSA is typically part of a low-deductible health insurance plan. HSA funds also roll over year to year, while FSAs are 'use it or lose it.' HSAs are owned by the individual, so your account follows you through life changes, but FSAs are owned by your employer, so you cannot take your FSA with you if you change jobs.

FSA accounts are designed for current year expenses only and there is no growth potential. HSAs build over time and a great way to pay for current expenses while saving and earning interest for your medical ‘rainy day’ fund.

What is a Qualified Medical Expense?

Knowing what qualifies as an eligible expense can feel intimidating, but resources like IRS Publication 502 are a great place to start. In general, many medical-related items can be considered qualified medical expenses. If you have specific questions or are in doubt, it is always best to reach out to a tax consultant. Some examples of what you can use HSA funds for include:

• Dr. Visits
• Dental Care
• Vision Care and Contacts
• Bandages
• Chiropractor
• Diagnostic Devices
• Therapy
• Surgery
• And more

Is an HSA Right for You?

HSA accounts are an excellent choice for individuals who are generally healthy and choose a high-deductible health care plan. They offer greater control over your health care expenses and how you manage your health. Contributions to your HSA can be made by you, your employer, or even a third party, making them a valuable option for self-employed individuals and small business owners who want to provide health benefits to their employees.

Take Control of Your Health and Finances with an HSA

Health Savings Accounts offer a flexible, possible tax-advantaged way to plan for both expected and unexpected medical expenses. By understanding the benefits, eligibility requirements, and how HSAs compare to FSAs, you can make informed decisions that support your financial goals and healthcare needs. If you think an HSA might be right for you, or if you have questions about getting started, the team at D.L. Evans Bank is here to help. Take the next step toward financial wellness and discover how an HSA can work for you!

*Consult a tax advisor