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HEALTH SAVINGS ACCOUNT

A health savings account (HSA) is a tax-advantaged medical savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses for those who are enrolled in a qualified high-deductible health plan (HDHP).

The funds contributed to an account are not subject to federal income tax at the time of deposit. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you can lower your overall health care costs.

For 2018, you can contribute up to $3,450 for self-only HDHP coverage and up to $6,900 for family HDHP coverage. HSA funds roll over year to year if you don't spend them. An HSA may earn interest, which is not taxable.

If are under age 65, and you use your HSA funds for any reason other than to pay for a qualified medical expense, those funds will be taxed as ordinary income, and the IRS will impose a 20% penalty. Once you're 65 or older, you'll be taxed for monies used for non-medical expenses, but won't pay a penalty.