A health savings account, or HSA, can save people considerable amounts of tax money via tax deductions and tax exemptions, but one should note the shortcomings and adjustments that occur due to the offset caused by inflation. Failing to comply with a given year’s explicit limitations and restrictions, then tax savings are nullified for that year. In order to be part of or pay into an HSA, one must use a health plan with high deductibles as well as a limit with regards to fees and payments that are paid out-of-pocket, although premiums are excluded. There is also a maximum amount that one can annually contribute to an HSA.
- Only those covered under a high deductible health plan with limits on out-of-pocket medical expenses are permitted to contribute to an HSA.
- The 2020 HSA contribution maximums are $3,550 for self coverage and $7,100 for family coverage.
- These contribution limits are $1,000 higher for those ages 55 and up.
“you can hold on to the account past your working years and use it tax-free for medical expenses in retirement”