Keeping your HSA healthy
They're a fact of (a healthy or otherwise) life: medical bills. Whether it's a new pair of contacts or a new pacemaker, you're going to spend money on your health. For those with a high deductible health plan (at least $1350 for individual, $2700 for family) you can open a Health Savings Account to pay for medical expenses with pre-tax income. It's a no-brainer for most folks, but there are ways you can get the most out of your HSA.
Because HSA contributions don't disappear at the end of the year, the unused balance stays in the account, earning interest. Therefore, it's best to max your contributions each year so you can tax advantage of the tax savings. In 2019, an individual can put in $3500, a couple can contribute $7000.
Since you have all that money sitting there, use your HSA funds to pay for those medical expenses. You can probably pay for your medical expenses directly from your HSA account, but if you can't track your payments and take a distribution from your HSA. Don't forget! You have to keep all your bills and receipts to prove the expenses were legitimate.
One of the best things about a Health Savings Account is that the contributions are tax-deductible and distributions are tax-free for qualified medical expenses. Bear in mind that traditional IRA distributions ARE taxable. You definitely want to prioritize your HSA contributions to take advantage of the additional tax benefit if it makes sense for your situation and you know you have medical bills coming.
Any time you have a question, like how much you should put into your HSA, give us a call.