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A Health Savings Account, or HAS as it is popularly known, is similar to a personal savings account. However, this savings account is only used for qualified healthcare expenses. In order to be eligible for this savings account, you need to be enrolled in a High-Deductible Health Plan (HDHP).
In this article, we will look at the various benefits of having a Health Savings Accounts.
Many expenses qualify:
Although a healthy savings account is used for a qualified health expense, there are tons of costs that come under this cover. Some of them include a wide range of medical, dental, and mental health services.
The qualified expenses may differ from one financial institution to another. Hence, before you open a health savings account, it is essential to note the offerings of the account by your bank. If they suit your need, then a health savings account can be a very lucrative account.
Others can contribute:
The contributions to this account can come from anywhere. You can add funds to this account, or your employer can do the same. Even your relatives and friends can add to your health savings account. However, some financial institutions have set limits to the funds which can be accumulated in this account. Hence, before you open a health savings account, you need to check the fund limit with your bank.
Pre-tax contributions:
Generally, the contributions are made to this account before tax is deducted, via payroll deductions by your employer. Which means, these funds are not counted in your gross income, and hence, they are not subject to taxes. However, since state income taxes are also levied, it is recommended that you check if this account can help you with the tax benefits on a state level.
Tax-free withdrawals:
One of the many benefits of a health savings account is that withdrawals from the funds are not subject to tax. All you have to do is ensure the fund is qualified as medical expenses.
Annual rollover:
In case you have funds left in your health savings account at the end of the year, it can be carried forward into the next year.
Portability:
Another benefit of a health savings account is that you can use it for future qualified medical expenses. This is irrespective of whether you change health insurance plans or work for another employer or organization or even retire.
Convenience:
Not many financial institutions may offer this, but, some health savings account come with a debit card. This makes it convenient to pay for prescriptions, medications, and other eligible expenses, instantly. What’s more, you can open a health savings account online too.
With all these benefits in light, a health savings account definitely seems like an essential savings account to have.
