A Health Savings Account (HSA) is a tax-advantaged savings account (similar to an IRA), the sole purpose of which is to pay for the health care expenses of the account owner, account owner’s spouse, or other dependents. An individual must be under age 65 to establish and contribute to a HSA. The HSA must always be combined with a high-deductible health insurance plan, the individual cannot be enrolled in Medicare, and cannot be claimed as a dependent on someone else’s tax returns. Contributions are tax deductible (with an annual limit). Growth is not taxed, and distributions for “qualified medical expenses” are tax free. If the account owner changes employers, the HSA moves with him or her, even if the employer contributed to the account. The HSA must be in the form of a trust or custodial account, established with a qualified trustee or custodian, such as an insurance company, bank, or similar financial institution. If you are interested in learning more about HSAs, you should contact your financial advisor.
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