A health savings account (HSA) is a tax-advantaged savings account that can be funded by individuals whose only health care coverage is a high-deductible health plan (HDHP). An HSA is an alternative way for you to pay for your qualified health care expenses and save for future qualified health care expenses on a tax-free basis.
You own and control the money in your HSA. You decide how to spend the money and what types of investments to make with the money in the account to help it grow.
You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of an HSA. An HDHP generally costs less than traditional health care insurance, so the money you save on insurance can therefore be put into the health savings account.
The following are some general features of health savings account:
- The contributions you make to your health savings account are tax deductible, which reduces your taxable income.
- Interest earned on your health savings account money is not subject to income taxes — in other words, you don’t have to pay income taxes on the earnings generated by the investments in your health savings account.
- You may make tax-free withdrawals to pay for qualified health care expenses.
- You own all of the money in your health savings account and it is yours to keep — even if you change medical plans.
Consider establishing a health savings account to maximize the benefits of your high deductible health plan. While you may open a health savings account with any institution of your choice, you can establish your account at BNY Mellon with our assistance.
Get the process started: