You can use this money to pay for qualified medical expenses directly by using the provided debit card. You can also reimburse yourself for expenses you paid for using your personal checking or savings accounts or credit card.
Any unused contributions roll over to the following plan year and never expire. Meaning you can even take your savings into retirement. Each account has different pros and cons, and every family has a different situation.
Here are a few things to consider for each type of account:. If you have questions about your specific employer-sponsored account, health plan or how these plans might affect your situation, reach out to your Human Resources department.
Read more by Lauren Hargrave. Lauren Hargrave is a writer from San Francisco who focuses on technology, finance and wellness. She follows comedians like most people follow bands and believes an outdoor sweat session can cure almost any bad mood. Disclaimer : the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action.
Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy. This serves as a plus for both you and your employer. In this case, HSAs can be extremely beneficial.
You will save money for healthcare costs over time and when you get sick, you can make tax-free withdrawals for qualified medical expenses. You can deduct your contributions from your federal taxable income. On the upside, you have until April 15 of the following year to contribute toward the maximum and claim it as a deduction. In fact, many experts suggest using HSAs as part of your holistic retirement planning strategy.
However, HSAs may not make sense if you expect frequent medical attention due to something like chronic illness. In this case, a low-deductible health plan may be a better choice. Your premiums would be higher.
Nonetheless, you can always open a flexible spending account FSA if your employer offers one. These function similarly to HSAs. You contribute money on a pre-tax basis. And you can make tax-free withdrawals to cover qualified medical expenses.
You must use your funds within the year or they disappear. If your employer offers an HRA, you should definitely consider opening an account. These are entirely employer-funded. You may not get any tax benefits yourself. In fact, your employer ends up getting the tax break.
But this arrangement encourages more employers to offer these accounts to their employees. The only other one that comes close is whether your employer offers a company match on its k plan.
All employees in the same class must receive the same HRA contribution. Employed and self-employed workers with a qualified high-deductible health plan can create an account and contribute. Expenses Covered Depending on the type of HRA, funds may be used to reimburse qualified medical expenses and health, vision, and dental insurance premiums.
Qualified medical expenses include acupuncture, ambulance service, blood sugar test kits and strips, chiropractic therapy, hearing aids and batteries, infertility treatments, X-ray fees, dental and vision exams and treatments, and co-insurance plan fees.
Employers may set a maximum rollover limit. Unused contributions can be rolled over to the next year. Portability No. An employee loses the benefit upon leaving the company. An employee keeps the account in the event of a job change. Contribution Amount Employers may change their contribution amount under certain circumstances. Employees can change the contribution amount during the year. Article Sources.
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Related Articles. Health Insurance Health Savings vs. Flexible Spending Account: What's the Difference?
Health Insurance HSA vs. Partner Links. A high-deductible health plan is health insurance with a high minimum deductible for medical expenses that must be paid before insurance coverage kicks in. Out-of-Pocket Expenses Out-of-pocket expenses are costs you pay from your own cash reserves—such as medical care and business trips—which may be reimbursable.
A Health Savings Account HSA is a tax-free savings account that can be used to pay for medical expenses not covered by high-deductible health plans. Investopedia is part of the Dotdash publishing family. Employers decide the employment categories e.
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