Key Savings and Tax Benefits
A Health Savings Account (HSA) is a type of savings account designed to help individuals and families save on their health expenses and reduce their future tax bill. To be eligible for an HSA, you must be enrolled in a high-deductible health plan (HDHP), which is a type of health insurance that has a higher deductible but lower monthly premium.
An HSA allows you to save money now for future health, dental and vision care expenses. Think of it as a triple tax-free savings vehicle for health-related expenses!
The following details some key benefits of an HSA and the account can help reduce your future tax bill.
Contributions to your HSA are tax deductible, meaning you can lower your tax bill by the contribution amount up to the maximum contribution limit for the year.
Tax-Free Withdrawals for Eligible Medical Expenses
When you use the funds in your HSA to pay for eligible medical expenses, the withdrawals are tax free, including expenses such as deductibles, copays, coinsurance and certain prescription drugs. You should keep receipts and documentation of all medical expenses you pay for with your HSA, as you may need to provide proof if you are audited by the IRS.
In addition to the tax benefits, an HSA also provides other benefits, such as:
- Portability: An HSA is an individual account, so you own it and can take it with you from job to job.
- Flexibility: You can use the funds in your HSA for eligible medical expenses whenever you need them, regardless of the time of year.
- Cost savings: Using an HSA can help you save money on your health expenses, as you can use the funds in your HSA to pay for eligible medical expenses that your insurance does not cover.
To maximize the benefits of an HSA, you should plan ahead and be strategic in how you use your HSA.
Tax-Free Investment Growth
Any interest or investment growth in your HSA is tax free. You can grow your HSA balance without having to pay taxes on the investment earnings, which can help you build up your savings faster.
Sentinel Benefits Card
The easiest way to tap into your HSA funds is through your Sentinel Benefits Card, which is linked directly to your HSA Cash Account. When you have to pay for an eligible expense or recurring cost, use your Benefits Card as your form of payment. It’s important to note that your Benefits Card will not be tied to any funds you have in investments. If you swipe your card for an amount greater than what is in your HSA Cash Account, you’ll have to move funds from your investments to cash.
Take the Next Step
To learn more about the investment options available to you, contact us to speak with a Financial Planner and get the conversation started! Call (888) 762-6088 or fill out the form to the right.