Much like anything, health savings accounts have a variety of advantages and disadvantages. Available to tax payers, a health savings account may allow an individual to cover their health and fund medical expenses. These accounts are extremely helpful for when health deteriorates or if any problems with health arise. Before taking out a health savings account it is essential to discover what the good and bad points are.
According to the Treasury Department a number of advantages accompany a health savings account. This includes the ownership of the money in a health savings account. Even the employer contributions given to the HSA will be accounted for as your own. It is your decision to determine the amount you wish to contribute, and you also determine where it is saved and when it is spent.
A major advantage of opening a health savings account is the flexibility that is attached to it. Whether you require the money in the HSA for future needs or for qualified medical expenses, you are entitled to use the funds for either. This allows you to stay in control of the funds in your account, using them to benefit you greatly.
There are some wonderful tax benefits linked to a health savings account. Anything contributed to your HSA is not considered taxable income, including any contributions made by your employer. All contributions will be deductible from your federal income tax, making this very advantageous. Health savings accounts are affordable for all types of people. With other forms of health insurance having extremely high premiums, a HSA is highly deductible and will have much lower premiums.
Health savings accounts can even earn you interest! The funds contributed into your account will accrue interest over time, making it worthwhile to open an account in the long run. Also very portable, a HSA will allow you to change employers and job roles without losing the benefits of a health savings account.
Although there are a great number of advantages that could tempt you into opening a health savings account, there are also some disadvantages that should be recognized. Depending on your circumstances and your current situation, you may realize that opening a HSA is not the best option for you.
In order to qualify for a health savings account, you may be required to enroll in a health plan that has a high deductible. This could result in you spending money to responsibly cover your health care costs. Another disadvantage is the fact that HSA funds have a limited usage and can only be used for particularly qualified medical expenses. This could prove difficult for some individuals.
Be careful not to use your health savings account for funding something other than the particular qualified medical expenses previously mentioned. This could result in taxable funds and you facing some kind of financial penalty. There are certain financial risks associated with a health savings account, and you should be considerably diligent about saving your money. Without focusing on funding the account appropriately, you might end up exceeding the HSA balance.
Despite the disadvantages, a health savings account is useful in many ways. Being aware of the negative aspects will allow you to prepare for what you are getting involved in. Ensure to file an income tax return in order to enjoy every aspect and all tax benefits of a health savings account.