It’s money you can set aside just for medical expenses. Funds you withdraw from your HSA are tax-free when used to pay for qualified medical expenses as described in Section 213(d) of the Internal Revenue Service Tax Code. New rules allowing tax-free withdrawals for over-the-counter medications. The expenses must be primarily to alleviate or prevent a physical or mental defect or illness, including dental and vision. Because of this rule, it's a good idea to keep receipts for any HSA-eligible expenses you pay with other cash so you can take that money from the account without taxes or penalties later on. You can use them to get tax-free funds from your account. In this article, we’ll dive into the basics of contribution limits, plus all the nuances that come up if you gain or lose HSA eligibility throughout the year. Flexible Spending Account Vs. Health Savings Account: Which Is Better? "The change is effective for expenses paid as far back as Jan. 1, 2020," says Ramthun. The funds contributed to an account are not subject to federal income tax at the time of deposit. From classes to subscriptions, these gifts don't require waiting in line at the post office. "As long as you have qualified medical expenses, you can always reimburse yourself for those expenses with HSA dollars anytime.". There will be a second round of stimulus checks and enhanced unemployment benefits, thanks to an agreement between the House and Senate. There’s actually a really helpful way to offset at least a portion of these rising costs. Generally, all expenses must be subject to the deductible except for certain preventive-care costs. The extended deadline can be valuable to individuals who can afford to set aside more dollars for emergencies or long-term savings, says David Speier, managing director of benefits accounts at Willis Towers Watson, an employee benefits consulting firm. For additional information visit Health Savings Account Website. Like the name suggests, an HSA is a savings account for your health. Keep track of any money you pay for over-the-counter drugs or menstrual supplies you bought after Jan. 1, 2020, as well as other HSA-eligible drugstore items, co-payments, deductibles, prescription drugs and other eligible expenses you paid since you opened the account. Health Saving Account / HSA rules, limits, and information UPDATED for 2021: Have you ever wondered if a Health Saving Account (HSA) is for you? The earnings and interest from this account are not taxed. Much like a checking account, HSA/FSA funds are managed by a financial institution. With an HSA, as we’ve stated, you don’t have to pay taxes on the money you contribute to this account. An HSA has a distinct set of rules applicable when the owner dies. Another rule and perk of HSAs is that you can use your money without paying taxes (as long as it’s used to pay qualified medical expenses). 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