Health Savings Accounts (HSA)

Simple and Easy to Understand

Health Savings Account plan can give you coverage much like traditional health insurance, but it saves you money in three major areas.  First, HSA plan premiums are on the low end and these plans avoid the big rate hikes seen in other plans.  Second, you can deduct money you deposit in your HSA from your taxable income to reduce your tax bill.  And, third, HSA money that you don’t need for health or dental care can grow with tax-free earnings to build up your savings for retirement.

To get started, you need a health insurance plan that qualifies to be partnered with an HSA.  As soon as your HSA plan has become effective, you may make an HSA deposit and start collecting tax-free earnings.

HSA plans are available from several leading insurance companies depending upon where you live. The plans are all similar in that they have deductibles that are at least $1,250 for individual coverage or at least $2,500 for family coverage for 2013.  Annual out-of-pocket costs are capped (including deductibles and co-payments, but not premiums) at $6,250 for individuals or $12,500 for families.

Your HSA will allow you to legally avoid income tax by depositing up to $3,250 for individuals or $6,450 for families into your HSA in 2013.  Whatever you deposit up to April 15, 2013 is considered an "above the line" tax deduction.  That just means you get a federal income tax deduction for your HSA contribution even if you take the standard deduction and don’t itemize deductions.

If your employer makes an HSA contribution for you, it is “excluded” from your income and not subject to any income tax or FICA.  Either way, this will immediately reduce your federal income tax.  All but three states also allow you to take a state income tax deduction for HSA contributions.  To see if your state offers tax deductions, please see our HSA State Income Tax page.

Get your HSA-qualified insurance plan as soon as possible so you can start growing your account with tax-free earnings.  On our site, you will find comprehensive information on Health Savings Accounts, HSA trustees and administrators, and instant quotes on HSA-qualified health insurance plans at the guaranteed lowest rate available.

Opening your own HSA is Action Step #1 in our Complete Protection Strategy, but our analysis has revealed several other ways that you can get more coverage and pay less money.  When you know how to do it, you can cut thousands of dollars off your health care expenses every year just by being a smart shopper.  Take a minute to look at the other Action Steps to save even more money.