E42: What is An HSA and Do I Need One?
February 19, 2020
What is a Health Savings Account and how does it work? What are these tax benefits everyone keeps talking about? You're in luck. Today we unpack HSAs and how they work.
What is An HSA and Do I Need One?
- Account designed for medical expenses
- Triple tax benefit
- File IRS Form 8889 if not through payroll deductions
- Grows tax-deferred
- Withdrawals are tax-free for medical expenses
- Need to use an HSA-approved high deductible health plan (HDHP)
- You can own an HSA any time but you can only contribute while you meet the requirements
- Annual limits: $3,550 single / $7,100 family maximum (2020) w/ $1,000 catch-up after age 55
- Can be used after age 65 for anything (not just medical expenses)
- Still tax-free for medical expenses
- Taxed at current tax rate for non-medical expenses
- Funds roll over and belong to you forever
- After your death, any funds remaining in your HSA are payable to the beneficiary you named on the account
- Funds can be invested, just like an IRA or 401(k)
Intro/outtro music credit: eccentric - I Can Show You [Argofox Release] by Argofox