Health Savings Account in Massachusetts

What is a Health Savings Account?

A health savings account (HSA) is an account that’s for medical expenses. Money is deposited into and withdrawn from an HSA, just as it is with other accounts. All the money in an HSA, however, is meant to be used for approved medical expenses. If funds are directed to non-medical costs, penalties may be assessed by the IRS.

What Tax Benefits Do HSAs Have?

Using an HSA to pay for medical expenses has two tax benefits. First, contributions are generally either tax-deductible or made with pre-tax income, both of which reduce the account holder’s adjusted gross income and, therefore, their tax burden. Second, any interest or growth that the account generates is untaxed.

What is the Difference Between an HSA and an FSA?

HSAs and flexible spending accounts (FSAs) are both accounts that are used to pay for medical expenses, and they provide similar tax benefits. There are a few key differences between the two types of accounts, though. In general:

Only individuals who have a high-deductible health plan can participate in HSAs, while an FSAs don’t have this eligibility requirement
The maximum allowed contributions are typically higher for HSAs than FSAs
The amount contributed to HSAs can usually be altered throughout the year, but many FSAs only let participants change their contribution amounts during open enrollment
Balances left in HSAs can often roll over to the following year, but they’re frequently forfeited in FSAs
HSAs can typically follow employees who change employers, while most FSAs are tied to a specific employer

What Medical Expenses Can an HSA Be Used For?

There are many approved medical expenses that funds in an HSA might be used for. Just a few examples of expenses that may be approved include the following;

Birth control
Breast pumps and nursing supplies
Prescription medications
Eye glasses and contacts
Co-insurance
COBRA premiums

How Much Can Participants Save with an HSA?

How much an individual saves by using an HSA will depend on their tax bracket. Someone who is in the lowest tax bracket won’t save as much as someone in the highest, but both participants will save when it comes time to pay taxes.

In theory, someone who was in the 39.6-percent tax bracket (the highest bracket for 2016) could save up to 39.6 percent of their contributions to an HSA. If they contributed $3,000, they may save $1,188. This doesn’t include any additional savings on growth that the accounts’ assets generated (the contribution limit in 2016 was $3,350 for individuals and $6,750 for families; those 55 and older could contribute an additional $1,000 to these limits).

How Can Interested Participants Open an HSA?

People interested in opening a health savings account can talk with a financial advisor. They’re able to explain the details about these accounts, and they can help get accounts set up.

While healthcare costs often can’t be avoided, there are tools available to reduce their impact on your finances. A health savings account is one such tool.

This material is for informational purposes only. All statements herein are subject to the provision, exclusions and conditions of the applicable policy. For an actual description of all coverages, terms and conditions, refer to the insurance policy. The Feingold Companies is a full-service organization in which offers insurance and employee benefit services through affiliated companies. All individuals listed are affiliated with The Feingold Companies and offer insurance and employee benefit services through Feingold Insurance Agency, Feingold Financial Management and Feingold Employee Benefit Services. Saul Feingold, David Dimenstein, Jed Brandes, Elisa Lindley, Velma Almeida & Carlos Ortiz offer securities through Cambridge Investment Research, Inc., a broker dealer member FINRA/SIPC . Advisory services through Cambridge Investment Research Advisors, Inc. a Registered Investment Adviser. The Feingold Companies are not affiliated with Cambridge Investment Research, Inc. Connor MacNeil is not affiliated with Cambridge Investment Research Advisors, Inc. to offer securities or advisory services. Please be advised that the above referenced New Lakeside and Dudley Insurance Agency only offers insurance related products and services. This office does not contain individuals who are licensed or registered to sale or promote securities related products. If you are interested in receiving securities related products and services please visit or contact our Worcester Office location only. This communication is strictly intended for individuals residing in the states of AZ, CA, CO, CT, DC, FL, GA, IA, IL, MA, ME, MI, MN, NC, NH, NJ, NM, NV, NY, OH, PA, RI, SC, TN, TX, VA. No offers may be made or accepted from any resident outside the specific state(s) referenced. Copyright 2021. All Rights Reserved

HEALTH SAVINGS ACCOUNT

What is a Health Savings Account?

What Tax Benefits Do HSAs Have?

What is the Difference Between an HSA and an FSA?

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What Medical Expenses Can an HSA Be Used For?

How Much Can Participants Save with an HSA?

How Can Interested Participants Open an HSA?

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