What is a Health Saving Account?

A Health Saving Account (HSA) is a tax-exempt trust or custodial account established exclusively for the purpose of paying or reimbursing qualified medical expenses.

Am I Eligible for an HSA?

You are eligible for regular HSA contribution if, with respect to any month you:

• Are covered under a high-deductible health plan (HDHP)
• Are not also covered by any other health plan that is not an HDHP (with certain exceptions for plans providing preventative care and limited types of permitted insurance and permitted coverage)
• Are not enrolled in Medicare
• Cannot be claimed as dependent on another individual's tax return

What is an HDHP?

An HDHP is a plan with an annual deductible no less than the amounts shown in the chart that follows.

Are There Other Requirements for the HDHP?

Yes. For HSA purposes, the HDHP must limit out-of-pocket expenses to no more than the amounts shown in the chart that follows.

What are an HSA Owners Responsibilities?

If you are eligible, you can establish an HSA in much the same way you would establish an IRA- with a qualified trustee or custodian. Each year, you re responsible for determining your allowable annual HSA contribution and whether you have qualified medical expenses eligible for reimbursement with nontaxable HSA distribution.

Who can contribute to My HSA?

If you meet the eligibility requirements for an HSA, you, your employer, your family members, and any other person (including non-individuals) may contribute to your HSA. This is true whether you are self-employed or unemployed.

How Much Can I Contribute to My HSA?

The maximum annual contribution amount is the standard limit as shown in the chart that follows.

Additionally, a "catch-up" contribution is available for eligible individuals who are 55 or older by the end of their taxable year end and not enrolled in Medicare.

How Do I Track My Information?

Your HSA information is available 24/7 online or as an e-statement.

How do I Claim the Federal Tax Deduction for My HSA Contribution?

Contributions to an HSA may be tax deductible, the earnings grow tax deferred, and the distributions to pay or reimburse qualified medical expenses are tax free.

You may deduct contributions made by anyone other than your employer as long as they do not exceed the maximum annual contribution amount. Employer contributions are not wages for federal income tax purposes.

Rollovers and transfers from an HSA, IRA, Archer medical savings account, health reimbursement arrangement, and health flexible spending account are not tax deductible.

When is the Contribution Deadline for Funding an HSA?

The deadline for regular and catch-up HSA contributions is your federal income tax return due date, excluding extensions, for that taxable year. The due date for most most taxpayers is April 15.

How are HSA Distributions taxed?

The qualified medical expenses must be incurred after the HSA has been established.

HSA distributions used exclusively to pay for or reimburse qualified medical expenses and are not included in gross income.

Any other distributions are included in income unless rolled over. Distributions not used to pay for or reimburse qualified medical expenses or not rolled over are subject to an additional 10 percent tax unless made after your death, your disability, or your attainment of age 65.

HSA custodians and/or trustees are not required to determine whether HSA distributions are used for qualified medical expenses.

Can I Return a Mistaken Distribution?

If you mistakenly distribute assets from your HSA, you may be able to return the assets to the same HSA. However, the law does not require a financial organization to accept the return of a mistaken distribution. If your financial organization permits the return of a mistaken distribution, you will need to be prepared to provide the Internal Revenue Service (IRS) with clear and convincing evidence that the HSA distribution was the result of a mistake of fact due to reasonable cause. A mistaken distribution can be returned no later than April 15 following the first you knew or should have known the distribution was a mistake.

How is HSA Activity reported?

Each year your HSA custodian and/or trustee reports to the IRS on IRS Form 5498-SA the contributions made to your HSA and IRS Form 1099-SA any HSA distributions you take. In addition, you file IRS Form 8889, Health Savings Accounts (HSA) as a part of your federal income tax return to show your HSA contribution and distribution activity.

How are Distributions Made by Check or Debit Card for Reporting Purposes?

A financial organization will generally treat a distribution made by check or debit card as a normal distribution. Consult your financial organization to find out its specific policy regarding distributions made by check or debit card.

Disclaimer:

This web page is intended to provide general information concerning the federal tax laws governing Health Savings Accounts. It is not intended to provide legal advice or to be a detailed explanation of the rules or how such rules may apply to your individual circumstances or under your state tax laws.

For specific information, you are encouraged to consult your tax or legal professional. IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, the instructions to IRS Form 8889, and the IRS Web site, www.irs.gov, may also provide helpful information.

top^