Health Savings Account (HSA)

Health Savings Accounts is like a savings accounts for your medical expenses.  You and/or your employer puts money into the account and whenever you have a qualified medical expense, you can either use your HSA debit card to pay for the expenses directly or you can pay out-of-pocket and get reimbursed.  The money that you don’t use in your HSA just keeps accumulating and the account stays with you forever, even when you switch employers.  In order to qualify for a HSA, you have to be enrolled in an HSA high-deductible health plan.  If you’re employer gives you the option of opening a HSA, you’re most likely eligible.

The good thing about HSAs is that it can reduce your taxes similar to the way Traditional IRAs do.  The amount you contribute to your HSA will reduce your gross income (report on line 25 of your 1040) dollar for dollar up to the max.  The max for a single person in 2014 is $3,300.  Another advantage to HSAs is that once you reach age 65, you can use the money for anything (not just qualified medical expenses) without having to pay a penalty.

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