US Health Savings Account (HSA)

A type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. HSA funds generally may not be used to pay premiums.

While you can use the funds in an HSA at any time to pay for qualified medical expenses, you may contribute to an HSA only if you have a High Deductible Health Plan (HDHP) — generally a health plan (including a Marketplace plan) that only covers preventive services before the deductible. .When you view plans in the Marketplace, you can see if they’re "HSA-eligible."

For 2022, if you have an HDHP, you can contribute up to $3,650 for self-only coverage and up to $7,300 for family coverage into an HSA.

For 2021, if you have an HDHP, you can contribute up to $3,600 for self-only coverage and up to $7,200 for family coverage into an HSA. For 2020, if you have an HDHP, you can contribute up to $3,550 for self-only coverage and up to $7,100 for family coverage into an HSA.

HSA funds roll over year to year if you don't spend them. An HSA may earn interest or other earnings, which are not taxable if you pay for qualified medical expenses.

If you are 65 or older, you can withdraw from your HSA fund for any purpose. You will pay the applicable income tax but without any tax penalty. If you withdraw money from your HSA before 65 years old or you are not disabled for an ineligible expense, the withdrawal will be subjected to income tax plus 20% tax penalty.

If you are 65 or older at the time of withdrawal, then you are free to withdraw money from your HSA for any purpose. You will have to pay the applicable income tax but there will be no additional tax penalty.

Some health insurance companies offer HSAs for their HDHPs. Check with your company. You can also open an HSA through some banks and other financial institutions.

The contribution deadline is April 15 when you filling the previous year tax return.

For more information: https://www.irs.gov/publications/p969#en_US_2020_publink1000204083

This calculator assumes:

  • Contribution and spending are counted at the end of year

  • Return compounding on yearly base

  • Contribution and spending may change each year. Here contribution and spending are average each year through the calculation period.