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Health Savings Account

What is an HSA?

A Health Savings Account (HSA) is a tax-deductible account that is used to help individuals and companies offset the impact of a high deductible health insurance plan.  The money in the account helps pay the deductible and any other eligible medical expenses for you, your spouse, and your eligible dependents.

The advantage of an HSA is that funds are not taxed when they are withdrawn to pay for qualified medical expenses.

What Are My Responsibilities Once I Open My HSA?

Each year you are responsible for determining your eligibility and allowable annual HSA contribution and whether you have qualified medical expenses eligible for reimbursement with your non-taxable distributions.  You are encouraged to seek guidance from a tax or legal professional.

Am I Eligible For An HSA?

You are eligible if you are covered under a qualifying High Deductible Health Plan (HDHP) and if you answer ìnoî to the following questions:

  1. Do you have other health coverage (except permitted coverage)?
  2. Are you enrolled in Medicare?
  3. Are you claimed as a dependent in another person’s tax return?

What is a High Deductible Health Plan?

An HDHP is a health plan with an annual individual deductible or a family deductible based on the chart below.

HDHP Annual Deductible
Tax Year
Self-Only Coverage
Family Coverage
2019
*$1,350
*$2,700
2020
*$1,400
*$2,800

*Subject to annual cost-of-living adjustments.

Are There Any Other Requirements to Open My Tax-deductible HSA?

Yes.  To be eligible, the HDHP must limit out-of-pocket expenses, based on the type of insurance coverage for 2019 to no more than $6,750 for you and $13,500 for your family.

Max. Out-of-Pocket Expenses
Tax Year
Self-Only Coverage
Family Coverage
2019
*$6,750
*$13,500
2020
*$6,900
*$13,800

*Subject to annual cost-of-living adjustments.

Are HSA’s available only if my employer participates?

No.  If you meet the eligibility requirements, you may participate.

Can My Employer Contribute to My HSA?

Yes, your employer may make contributions to your HSA.  In fact, your family members, and any other person may contribute to your HSA.  This applies whether you are employed, self-employed, or unemployed.

JD-Bank-Health-Savings-Account

How Much Can Be Contributed to My HSA?

See the chart below.  The maximum annual contribution amount is the standard limit.  It is reduced by any employer contributions to your HSA and any qualified HSA funding distributions from your IRA to your HSA.

Also, “catch-up” contributions are available for eligible individuals who are age 55 or older by the end of their taxable year and for any months individuals are not enrolled in Medicare.

Contribution Limits
Tax Year
HDHP Coverage
Standard Limit
Catch-up Limit
Max. Contribution Limit
2019
Self-Only
*$3,500
$1,000
*$4,500
2019
Family
*$7,500
$1,000
*$8,000
2020
Self-Only
*$3,550
$1,000
*$4,550
2020
Family
*$7,100
$1,000
$*8,100

*Subject to annual cost-of-living adjustments.

When Can I Take Distributions from My HSA?

You may take a distribution at any time, even if you are not currently eligible to have contributions made to your HSA. HSA distributions used exclusively to pay for or reimburse qualified medical expenses incurred by you, your spouse, or your dependents are not included in your gross income for the year of the distribution.

Any other distributions are included in income unless rolled over.  Distributions not used to pay for or reimburse qualified medical expenses or that are not rolled over are subject to an additional 20 percent tax unless made after your death, your disability, or your attainment of age 65.*

*You should always seek the advice of a tax or legal professional for guidance on HSA distributions.

What is a Qualified Medical Expense?

Qualified medical expenses include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease that affects any structure or function of the body, including amounts paid for prescription drugs and items that are not medicines, such equipment, crutches, bandages and diagnostic devices.  Note:  You are solely responsible for determining if you have a qualified medical expense.

Disclaimer

This is intended to provide general information concerning federal tax laws governing HSAs. It is not intended to provide legal advice, tax advice or to be a detailed explanation of the rules or how such rules may apply to your individual circumstances or under your state tax laws. For specific information you are encouraged to consult your tax or legal professional.