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  • Writer's pictureNels Larsen, CPA, CMA, CFM

More reasons to have a Health Savings Account (HSA)

Updated: Apr 7, 2023

Many people have health savings accounts, or at least have heard of them. While you (or your employer) can only contribute money to them if you have a qualifying High Deductible Health Plan there is much to know about them. Such as:

1) Let's say you have an HSA but forget to use it to pay for medical expenses that you instead paid for out of pocket. You can reimburse yourself for these expenses from your HSA, even if it is years down the road. When you do this, the money in your HSA can grow tax free, if you have invested the funds, similar to an IRA. The reimbursement back to yourself is NOT taxable!

2) your HSA is portable, meaning if you leave your employer to go to another one, or you leave to start your own business you can take your HSA with you - it belongs to you, not your employer - just like a bank account!

3) You can use money in an HSA to pay for medical expenses not only in the year you qualify to put the money in, but also in subsequent years, even if you no longer have the required High Deductible Health Plan. A common example is having the HDHP and HSA when you are younger, and contributing money into your HSA along the way. When you are older and want to move to a lower deductible health plan you can still use money in the HSA to pay for health care expenses not covered by your insurance.

4) an HSA is not taxable if inherited by a spouse - but they are taxable income to anyone else who inherits it.

5) HSA's can be used to pay certain insurance premiums, such as COBRA. Also, if a taxpayer is collecting unemployment benefits any health care coverage premiums are eligible. for long-term care insurance premiums. For 2022 tax year the amount that can be used is

6) HSA money can be used, up to certain limits, to pay for long term care insurance premiums. These depend on the taxpayer's age. For example, 40 years old or younger can pay up to $450 a year on long term care insurance premiums from their HSA. This works on a sliding scale until age 71 or older can pay up to $5,640 a year.


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