Preparation: the Best Medicine
A Health Savings Account (HSA) is a tax-advantaged, interest-bearing* medical savings account available to U.S. taxpayers enrolled in a High Deductible Health Plan (HDHP).
Health Savings Account funds may be used to pay for qualified medical expenses at any time without federal tax liability or penalty. Beginning in 2011, over-the-counter (OTC) medications cannot be purchased with HSA funds without a doctor’s prescription.
The funds contributed to an account are not subject to federal income tax at the time of deposit. Unlike flexible spending accounts (FSAs), funds roll over and accumulate year-to-year if not spent. Health Savings Accounts are owned by the individual, which differentiates them from company-owned Health Reimbursement Arrangements (HRAs) that are an alternate tax-deductible source of funds paired with either HDHPs or standard health plans.
Withdrawals for non-medical expenses are treated very similarly to those in an Individual Retirement Account (IRA) in that they may provide tax advantages if taken after retirement age, and they incur penalties if taken earlier.
* For all interest-bearing accounts, we calculate interest using the daily balance method.
Open a Health Savings Account (HSA)
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