Saving for medical expenses
Health Savings Accounts
Health Savings Accounts (HSAs) are tax-advantaged savings accounts to help individuals save for qualified medical and retiree health expenses.
Generally, an HSA can be established by individuals who:
- Are covered by a qualified, high-deductible health insurance plan,
- Are not covered by any other health insurance that is not a high deductible plan,
- Are not enrolled in Medicare,
- Have not received VA Medical Benefits in the previous 3 months, and
- Cannot be claimed as a dependent on another person’s tax return
Benefits of a CoVantage Health Savings Account
- No monthly service charge.
- No transaction fees.
- Tiered interest rate.
- Low minimum balance of just $10.
- CoVantage provides a quarterly statement, except during months when electronic transactions occur, and then statements are provided monthly.
- HSA transactions can be viewed using CoVantage Online or Mobile.
- Free debit card. Make payments to any provider or pharmacy that accepts Visa. Withdraw cash at any ATM.
Contributions to an HSA
It is the individual’s responsibility to determine whether they are eligible to make contributions to an HSA. The maximum amount that can be contributed to an HSA is set by the IRS each year. The contribution amount will also depend on whether the account is a single or family HSA. Individuals, their employer, or both can make contributions to an HSA. Deposits can be made in-person, by mail, direct deposit, or using payroll deduction.
Like an IRA, each year between January 1 and April 15, individuals can designate HSA contributions to the “current tax year” or “prior tax year.” Note: All contributions using electronic deposit, payroll deduction, or automated posting will be reported as “current year” by CoVantage Credit Union.
Unlike contributions to a flexible spending account, there is no “use it or lose it” provision with an HSA. At the end of each year, the balance in your HSA is carried over and can be used for medical expenses incurred in future years. HSA balances belong to the individual even if you change employers.
Tax Treatment of an HSA Account
Distributions from an HSA are tax-free provided they are used for “qualified medical expenses.” It is the HSA account owner’s responsibility to ensure that HSA funds are used to pay for qualified medical expenses and to maintain appropriate records for tax purposes. Always consult a tax advisor for qualified advice regarding taxation of your account.