Here are some benefits of having an Health Savings Account:
- You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you don’t itemize your deductions on Form 1040.
- Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.
- The contributions remain in your account until you use them.
- The interest or other earnings on the assets in the account are tax free.
- Distributions may be tax free if you pay qualified medical expenses.
- An HSA is “portable.” It stays with you if you change employers or leave the work force.
Qualifying for an HSA
- To be an eligible individual and qualify for an HSA, you must meet the following requirements:
- You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.
- You generally have no other health coverage except what is permitted under regulations. (Exceptions include dental, vision, long-term care, accident and specific disease insurance.)
- You are not enrolled in Medicare.
- You cannot be claimed as a dependent on someone else’s tax return.
Source: The IRS