Yes, you can open a health savings account (HSA) even if your employer doesn't offer one. But you can make current-year contributions only if you are covered by an HSA-qualified health plan, also known as a high-deductible health plan (HDHP). And you can't be covered by other disqualifying coverage as defined by tax laws, such as Medicare, Medicaid, TRICARE or a spouse's health plan that is not HSA-qualified. Nor can you be claimed as a tax dependent in that year. To learn more, refer to the
Annual Limits Guide (PDF).
Contributing to an HSA is worth considering because it can be a powerful savings vehicle as well as a way to help pay for health care costs. First, there are the potential tax advantages. Contributions, up to the annual limit set by the tax laws, can be deducted from your taxable income for federal and most state income tax; any interest and investment earnings in your HSA accumulate tax-free; and withdrawals for qualified health care payments remain tax-free.Footnote 1
Then there's the flexibility. Unused funds in the account continue to roll over from year to year, even if you discontinue coverage in an HSA-qualified health plan. And after age 65, you can withdraw funds from the account for non-medical expenses without paying an additional 20% tax (but the distribution will be subject to ordinary income tax since it is not a qualified health care payment).
What are my contribution limits?
For exact limit amounts, refer to our
Annual Limits Guide (PDF). If you turn 55 during the tax year or are already 55 or older, you qualify for a catch-up contribution of $1,000 per year. As far as balances, there are no limits or thresholds you need to maintain.
What expenses can an HSA cover?
HSA funds can be used for:
- Qualified out-of-pocket medical expenses you incur that are not covered by your health plan
- Medical, dental or vision coinsurance and co-payments
- Prescription drugs
- Prescription eyewear and supplies (eyeglasses, goggles, safety glasses, sports eyewear, sunglasses)
- Some medical treatments not covered by your insurance, such as visits to a chiropractor
You can begin by reviewing the various health care options your employer provides to determine whether an HSA-qualified health plan might be right for you, if offered. If you decide to enroll in an HSA-qualified health plan, you also should consider opening an HSA and trying to contribute as much as you can up to the annual limit. HSAs are available from a variety of institutions, but it's worth noting that not all HSAs are created equal; some providers have additional fees for the debit card or the investment portion of the account.