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Health Savings Accounts (HSA)

A Health Savings Account (HSA) is a tax-exempt trust or custodial account established exclusively for the purpose of paying or reimbursing qualified medical expenses of you, your spouse, and your dependents.

Am I Eligible for an HSA?

You are eligible for a regular HSA contribution, with respect to any month, you:

  • Are covered under a high-deductible health plan (HDHP) on the first day of such month;
  • Are not also covered by any other health plan that is not an HDHP (with certain exceptions for plans providing preventive care and limited types of permitted insurance and permitted coverage);
  • Are not enrolled in Medicare; and
  • Cannot be claimed as a dependent on another individual’s tax return.

What is an HDHP?

An HDHP is a plan with an annual deductible no less than the amounts shown in the chart that follows:

HDHP Annual Deductible
Tax Year
Self-Only Coverage
Family Coverage
2008
$1,100
$2,000
2009
$1,150
$2,300
2010
$1,200*
$2,400*

*Indicates cost-of-living adjustments

Are There Other Requirements for the HDHP?

Yes. For HSA purposes, the HDHP must limit out-of-pocket expenses to no more than the amounts shown in the chart that follows.

Maximum Out-of-Pocket Expense
Tax Year
Self-Only Coverage
Family Coverage
2008
$5,600
$11,200
2009
$5,800
$11,600
2010
$5,950*
$11,900*

*Indicates cost-of-living adjustments

What are an HSA Owner’s Responsibilities?

If you are eligible, you can establish an HSA in much the same way you would establish an IRA-with qualified trustee or custodian. Each year, you are responsible for determining your allowable annual HSA contribution and whether you have qualified medical expenses eligible for reimbursement with nontaxable HSA distributions.

Who Can Contribute to My HSA?

If you meet the eligibility requirements for an HSA, you, your employer, your family members, and any other person (including non individuals) may contribute to your HSA. This is true whether you are self-employed or unemployed.

How Much Can I Contribute to My HSA?

The maximum annual contribution amount is the standard limit. Additionally, a “catch-up” contribution is available for eligible individuals who are age 55 or older by the end of their taxable year and have not enrolled in Medicare. The chart that follows shows the contribution limits.

Contribution Limits
Tax Year
Self-Only Coverage
Family Coverage
Additional Catch-Up
2008
$2,900
$5,800
$900
2009
$3,000
$5,950
$1,000
2010
$3,050*
$6,150*
$1,000

*Indicates cost-of-living adjustments

How Do I Claim the Federal Tax Deduction for My HSA Contribution?

Contributions to an HSA are fully deductible, the earnings grow tax deferred, and distributions to pay or reimburse qualified medical expenses are tax free.

You may deduct contributions made by anyone other than your employer as long as they do not exceed the maximum annual contribution amount. Employer contributions are not wages for federal income tax purposes.

Rollovers and transfers from HSAs, IRAs, Archer medical savings accounts, health reimbursement arrangements, and health flexible spending accounts are not deductible.

When is the Contribution Deadline for Funding an HSA?

The deadline for regular and catch-up HSA contributions is your federal income tax return due date, excluding extensions, for that taxable year. The due date for most taxpayers is April 15.

How are HSA Distributions Taxed?

The qualified medical expenses must be incurred after the HSA has been established.

HSA distributions used exclusively to pay for or reimburse qualified medical expenses incurred by you, your spouse, or your dependents are not included in gross income.

Any other distributions are included in income unless rolled over. Distributions not used to pay for or reimburse qualified medical expenses or not rolled over are subject to an additional 10 percent tax unless made after your death, your disability, or your attainment of age 65.

HSA custodians/trustees are not required to determine whether HSA distributions are used for qualified medical expenses.