That could be valuable later if you need health care for chronic conditions as you get older, or if you end up needing long-term care in retirement. The more money you can leave in your account, the more opportunity it has to grow. It’s also important to coordinate which expenses you’ll pay with your spouse, particularly if they have health insurance or an HSA of their own. Since you’re already getting a tax break you may choose to hold investments in your HSA that are less tax-efficient, while leaving something like an ETF in your brokerage account. Beyond that, however, you may want to create a personalized strategy for making the most of the money.įor example, your HSA may give you the option to invest in mutual funds, index funds or exchange-traded funds. Cosmetic surgery, for instance, doesn’t make the cut. When using an HSA to pay for health care expenses, the first rule is to know what you can and can’t use the money for. Your HSA money could help to fill the gap if your spouse has health insurance that isn’t as comprehensive as yours, or they have a condition that requires higher out-of-pocket costs. Health Savings Accounts offer multiple tax breaks so there’s no reason not to use them to pay for your spouse’s medical expenses if they’re qualified under IRS rules. The individual coverage limits for 20 are $3,650 and $3,850, respectively. An additional $1,000 catch-up contribution is allowed for savers who are 55 or older. If you both have a Health Savings Account through your respective health plans, the maximum you can contribute to your HSAs combined is the family contribution limit. However, the total amount you can contribute as a couple is affected by which of you has an HSA. Paying medical expenses for a spouse out of your Health Savings Account doesn’t entitle you to a higher contribution limit. But if your spouse needs new glasses, for example, you could use your HSA to pay for them. If you both have an HSA, your total contributions for the year cannot exceed the annual contribution limit for family coverage.Īgain, qualified medical expenses are defined by the IRS.Using your HSA to pay qualified medical expenses for your spouse does not affect your annual contribution limit.You may only use your HSA to pay for qualified medical expenses for yourself, spouse, children or other dependents.That’s true whether you have individual coverage or family coverage with an HSA through your health plan. The IRS allows you to use your HSA to pay for eligible expenses for your spouse, children or anyone who is listed as a dependent on your tax return. You can use money from your HSA to pay for your spouse’s medical expenses as long as those expenses fit into the IRS rules. You can continue making contributions, allowing your money to grow, and only withdraw it when you actually need it to pay for health care. Unlike a flexible spending account (FSA), any money left in your HSA at the end of the year rolls over to the next year. One great thing about HSAs is that they’re not use it or lose it. The 20% penalty goes away when you turn 65 but any non-medical withdrawals would still be subject to ordinary income tax. You’ll pay ordinary income tax on the money, plus a 20% withdrawal penalty. Should you withdraw money from an HSA for anything other than eligible medical expenses, it’s treated as a taxable distribution. That’s a very short list of what’s covered, but it underscores what an HSA is meant to be used for. The IRS publishes a list of HSA-eligible expenses, which includes: Money in your HSA grows tax-deferred and you can withdraw it tax-free for qualified medical expenses. Your employer can also contribute to your HSA on your behalf, though total employer-employee contributions cannot exceed the allowed annual limit. The limit is based on whether you have individual or family coverage and are adjusted annually for inflation. HSAs allow you to make contributions each year, up to a specified limit. These accounts are associated with high deductible health plans, which you might be enrolled in through your employer or through the federal health insurance marketplace. Health Savings Accounts are special savings accounts that allow you to set aside money for medical care.
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