How a Health Savings Account (HSA) Works?

A health savings account is a savings account that helps you to pay for your health treatment expenditure tax-free. An HSA functions with an eligible medical insurance policy that comes with a higher deductible. An individual can use his HSA to make payment for the eligible medical care expenditure. It helps you to save money as it is tax-free. If you want to save up your money for your retirement, it can be very helpful.

Keep in mind that family health plan and health savings account; both are different from each other.

How an HSA work?
An HS account is available only with the specific kinds of health insurance plans that come with a higher deductible. Generally, these insurance plans come with lower premiums. These plans are often referred as consumer-driven medical insurance plans.

Every penny you spend on an HS account is tax-deductible. It means that you don’t have to pay tax on. For instance, if you add the maximum amount in your HS account every year and based on your income, you fall in the 28 percent tax bracket, you won’t have to anything for your taxes.
At the time you take your money out. For the usage of eligible expenses related to health, you don't have to pay any tax that time as well. You can use your HS account for the health care expenditure that is not covered by your medical insurance.

You can compare a traditional medical insurance plan with a high-deductible medical plan and HS account and you would get to know the pros and cons of it.
Thanks to the tax-saving its benefits, an HS account can be really helpful in order to save money on health care expenses and much more.

Benefits of a Health Savings Account

Mentioned below are the benefits of a Health Savings Account.

•The contributions made for HSA are tax-free.

•The withdrawals related to the medical care expenditure are tax-deductible. Taxes would be levied on the withdrawals related to the non-eligible expenditure and a penalty could be charged as well.
•Individuals get to earn tax-free interest on the funds deposited in their accounts. In addition to that, their accounts might give them various investment options as well.

At the end of every year, your HS account balance rolls over so that you do not lose your hard earned money.

When you’re 65 years old, you can go ahead with using your HS account money for any desired purpose. HSA withdrawals related to the eligible medical care expenditure remains tax-free. Taxes would be levied on your HS account withdrawals for any other reason but won’t include a penalty.

Money Saved in your Health Savings Account Earn Interest
You can invest a portion of your Health Savings Account money in various investment options all you have to do is maintain the base balance in your HS account. Your money remains tax-free when you make investments. You can use your HS account as a saving account for your retirement.