A health savings account (HSA) help you save money on qualified medical expenses. The funds contributed to the account are not subject to federal income tax at the time you deposit them. Unlike a flexible spending account (FSA), funds roll over and accumulate year after year if you don't spend the full amount - there's no use-it-or-lose-it feature.
HSA funds may be used to pay for qualified medical expenses at any time without owing federal taxes. Withdrawals from the HSA fund for non-medical expenses are treated very similarly to those withdrawals from an IRA. They may provide tax advantages if taken after retirement age,and they incur penalties if taken earlier.
How you save
- Contributions to your account may be tax-deductible on your federal income tax return, and, in most cases, on your state income tax return (consult with your personal tax advisor to find out the requirements in your state).
- You can pay for qualified medical expenses with tax-free withdrawals
- Unlike Flexible Spending Accounts, your HSA has no use-it-or-lose-it requirement and also stays with you when you change jobs or retire.
How you can use your funds
- Standard medical services such as office visits and annual medical physicals
- Prescriptions, some over-the-counter medicines and health care products
- Preventive and restorative dental care, as well as braces and other orthodontics for children and adults
- Eyeglasses, contact lenses and laser eye surgery
