In the tax world, the term “HSA” stands for “health savings account.”
An HSA allows you to save money, tax-advantaged, for medical expenses. Contributions to an HSA reduce your taxable income, and withdrawals from an HSA are tax-free if used for medical expenses.
To qualify for an HSA, the basic requirements are:
- You must be covered under a high-deductible health plan (HDHP). For 2013, an HDHP is a plan that has a minimum annual deductible of $1,250 for single coverage and $2,500 for family coverage. The maximum annual deductible and out-of-pocket expenses is $6,250 for single coverage and $12,500 for family coverage.
- You generally cannot have any other health coverage, including Medicare
- You cannot participate in an HSA if you are eligible to be claimed as a dependent on someone else’s return, even if that person doesn’t actually claim you as a dependent.
For more information about HSAs, consult IRS Publication 969.