4 Common Myths About HSAs
Written by
Karen Doyle
Edited by
Daria Uhlig
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If you have a high-deductible health plan, or HDHP, you might also have the option to use a health savings account, or HSA. An HSA is an account to which you can contribute pre-tax dollars, which you can then use for qualified medical expenses.
HSAs are a powerful tool for reducing your tax liability, but they are often misunderstood. Here are some common myths about HSAs and the truth about these accounts.
Myth #1: You Can’t Contribute If You Have an IRA
This is simply not true. HSA contributions are independent of any retirement plan contributions, like IRAs, Roth IRAs and 401(k)s. In 2024 you can contribute up to $4,150 as an individual or up to $8,300 for a family, plus an extra $1,000 if you are age 55 or older.
Myth #2: If You Don’t Use It, You Lose It
Unlike flexible spending accounts, you can roll over excess funds in your HSA into next year’s plan at the end of each year. You can keep doing this as long as you want. This means that if your medical expenses are modest, you can roll the extra contributions over all the way until retirement to build a nice little nest egg to pay for your Medicare premiums or medical expenses.
Myth #3: Medical Expenses Are Tax Deductible Anyway, So It’s Not Worth It
While it’s true that medical expenses can be tax deductible, you can only deduct the amount that is more than 7.5% of your adjusted gross income. When you use an HSA you fund it with pre-tax dollars, the money grows tax-free and you don’t pay taxes when you withdraw money unless you use it for something other than qualified medical expenses.
Myth #4: People Who Buy Their Own Health Insurance Can’t Use an HSA
Even if you don’t get your health insurance through an employer, you can open an HSA if you are enrolled in an HSA-qualified high deductible health plan.
If you are eligible to open an HSA, look into it. It can make a big difference in your out-of-pocket medical expenses, now and in the future.
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