Healthcare is still a hot topic. So are HSAs (Health Savings Accounts). Proponents advocate expanding HSAs to save on health costs, and highlight their ability to provide tax breaks. Opponents argue HSAs don’t help people and many can’t afford them. Here are 10 HSA rules to keep in mind as we watch the healthcare debate rage on in Washington.
1. To contribute, you must have a high deductible health plan. If you aren’t sure, ask your employer or health insurance provider if your plan qualifies.
2. Your age and type of health insurance determines your contribution limit. Assuming you have family coverage and are 55 or older in 2018, your contribution limit is $7,750.
3. Almost anyone is eligible because there are no earned income requirements, and contributions aren’t tied to income limits.
4. It doesn’t matter what your yearly income is. When you make a contribution, that contribution is deductible.
5. Either you or your employer fund the HSA. Just remember combined contributions can’t be more than your yearly contribution limit.
6. Qualified medical expenses are anything that qualifies for the medical and dental expense deduction.
7. You can’t contribute after you enroll in Medicare. (But you can keep your existing HSA. This means you get to continue taking tax-free distributions for your qualified medical expenses.)
8. When you name your spouse as beneficiary, they inherit upon your death. This allows your spouse to continue taking tax-free distributions for qualified medical expenses.
9. Tax-free distributions are used for qualified medical expenses. This includes expenses for your spouse or dependent.
10. You can also take tax-free distributions for medical expenses you paid for out-of-pocket. All you need is proof of expenses incurred after establishing your HSA, documentation showing you paid for the expenses.