Health Savings Account (HSA) Checking
HSA Checking Account
We all know that health care costs keep rising and it’s difficult to figure out what’s best for you and your family. Many employers now offer High Deductible Health Plans (HDHP), and that may give you the opportunity to consider opening an HSA Checking Account. To be eligible for an HSA account with MCU, you must be an Ultra, Plus or e-Connect Advantage level member.
What is it?
An HSA Checking Account allows you to save and pay for future qualified health care expenses. HSA accounts have these tax advantages:
- Pre-tax or tax deductible contributions
- Tax free distributions, when used for qualified expenses
- Tax free interest
It’s best that you consult with your tax advisor to identify the tax advantages that may apply to your situation.
Eligibility: The Basics
- You must be enrolled in an HSA-qualified High Deductible Health Plan (HDHP) to open or contribute to the HSA Checking Account.
- You cannot be covered by any other type of health plan that is not an HDHP.
- If you are enrolled in Medicare or Medicaid you cannot open an HSA Checking Account.
- Military healthcare (Tricare) does not currently offer an HSA-qualified HDHP. So if you are on Tricare, you cannot have an HSA Checking Account.
- If you have received Veterans Administration health benefits in the last three months you cannot have an HSA Checking Account.
- You or your spouse cannot be enrolled in an employer’s Flex Plan.
- You cannot establish an HSA Checking Account for your minor children.
Some Key Benefits of an HSA Checking Account
- Control— The money in your HSA Checking Account is entirely your own. Even if your employer makes contributions, they have no authority or responsibility on how you spend the money. And if you change jobs, the money stays with you.
- “No Use It or Lose It” Rule— Your HSA Checking Account contributions roll over each year. The money stays in your account—it’s yours to keep.
- Tax Savings— Your contributions to the HSA Checking Account may be made with pre-tax dollars through payroll deductions, lowering income taxes. You also can contribute directly to your account and receive an above the line tax deduction (the amount is subtracted from your income before your adjusted gross income is calculated) at the end of the year on your taxes.
- Pay Medical Expenses for Family: Tax-free withdrawals for eligible expenses can be used to pay for qualified expenses of the account holder, spouse, and children. However the children must be claimed as dependents on your tax return.
You will need to keep records of all medical expenditures with your annual tax filing in case you ever get audited by the IRS. Those receipts are the only acceptable proof to the IRS that you spent the tax-free funds on approved products and services.
You can find details at the IRS Publication Number 969.
- Contributions— For 2017, individuals may contribute a total of $3, 400 and a family may contribute a total of $6,750. For people 55 years and older, the catch-up contribution is $1000 for each spouse. Catch-up contributions can be made any time during the year in which the HSA participant turns 55 years old. See https://www.irs.gov/pub/irs-drop/rp-15-30.pdf
- Eligible Expenses— There is a wide range of allowable tax-free expenditures, including vision and dental expenses. A description of eligible HSA expenses can be found in IRS Publication 502.
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