What is a Health Savings Account?

So Donald Trump has mentioned on several occasions that he would like to expand the use of Health Savings Accounts (HSA).  We have been talking about these for years, along with HRA and FSA plans.  I figured I would give some detailed information on these since there seems to be some confusion.

A health savings account (HSA) is a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA. No permission or authorization from the IRS is necessary to establish an HSA. You set up an HSA with a trustee. A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. The HSA can be established through a trustee that is different from your health plan provider.

So in English, this just means, it is an account you set up with someone, a bank, your investment adviser, insurance company, or someone like that.  You open the account and deposit money in there either one time or many times throughout the year.

What are the benefits of an HSA? 

1. You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040. 
2. Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income. 
3. The contributions remain in your account until you use them. 
4. The interest or other earnings on the assets in the account are tax free. 
5. Distributions may be tax free if you pay qualified medical expenses.
6. An HSA is "portable." It stays with you if you change employers or leave the work force.

The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. For 2016, if you have self-only HDHP coverage, you can contribute up to $3,350. If you have family HDHP coverage, you can contribute up to $6,650.  For 2017, if you have self-only HDHP coverage, you can contribute up to $3,350. If you have family HDHP coverage, you can contribute up to $6,700.  

Additional contribution. If you are an eligible individual who is age 55 or older at the end of your tax year, your contribution limit is increased by $1,000. For example, if you have self-only coverage, you can contribute up to $4,350 (the contribution limit for self-only coverage ($3,350) plus the additional contribution of $1,000).   

Exception if you are enrolled in Medicare. Beginning with the first month you are enrolled in Medicare, your contribution limit is zero. Example.... You turned age 65 in July 2015 and enrolled in Medicare. You had an HDHP with self-only coverage and are eligible for an additional contribution of $1,000. Your contribution limit is $2,175 ($4,350 × 6 ÷ 12).

This is the form that you will fill out when you do your taxes - https://www.irs.gov/pub/irs-pdf/f8889.pdf

For most of this information I used https://www.irs.gov/pub/irs-pdf/p969.pdf so if you need additional information, go here and check out the actual guidance.

Feel free to call or email us if you have questions, we would be happy to help in any way that we can.

In Johnson City, Kingsport, and Bristol Tennessee and most of South West Virginia, TruPoint Bank offers a FREE HSA  https://www.trupointbank.com/?Cabinet=Main&Drawer=Personal&Folder=Deposit+Products&SubFolder=Health+Savings+Accounts 

Andrew Darlington CRM, CIC, CBIA, AAI