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Health Savings Accounts

 

A Health Savings Account (HSA) is an account that you can put money into, to save for future medical expenses.  There are certain advantages to putting money into these accounts, including favorable tax treatment.  HSAs were signed into law by President Bush on December 8, 2003.

Who Can Have an HSA
Any adult can contribute to an HSA if they:
   1.  Have coverage under an HSA qualified "high deductible health plan" (HDHP)
   2.  Have no other first-dollar medical coverage
   3.  Are not enrolled in Medicare
   4.  Cannot be claimed as a dependent on someone else's tax return
 
Contributions to your HSA can be made by you, your employer, or both.  However, the total contributions are limited annually.  If you make a contribution, you can deduct the contributions (even if you do not itemize deductions) when completing your federal income tax return. Contributions to the account must stop once you are enrolled in Medicare.  However, you can keep the money in your account and use it to pay for medical expenses tax-free.
 
High Deductible Health Plans
You must have coverage under an HSA-qualified "high deductible health plan" (HDHP) to open and contribute to an HSA.  Generally, this is health insurance that doesn't cover first dollar medical expenses.  Federal law requires the health insurance deductible be at least:
$1,100 - self only coverage
  $2,200 - family coverage

In addition, annual out-of-pocket expenses under the plan (including deductibles, co-pays, and co-insurance) cannot exceed:

$5,600 - self only coverage
 $11,200 - family coverage
 
In general, the deductible must apply to all medical expenses (including prescriptions) covered by the plan.  However, plans can pay for "preventive care" services on a first-dollar basis (with or without a co-pay). "Preventive care" can include routine pre-natal and well-child care, child and adult immunizations, annual physicals, mammograms, pap smears, etc.
 
HSA Contributions
You can make a contribution to your HSA each year that you are eligible:$2,900 - self only coverage$5,800 - family coverage
 
Catch-Up Contributions
Individuals age 55 and older can also make additional "catch-up" contributions.  The maximum annual catchup contribution is as follows:
 
  2008 - $900
  2009 and after - $1,000
 
Determining Your Contribution
Your eligibility to contribute to an HSA for each month is generally determined by the effective date of your HDHP coverage.  If you do not have HDHP coverage for the entire year; you will not be able to make the maximum contribution.  All contributions (including catch-up contributions) must be pro-rated.  Your annual contribution depends on the number of months of HDHP coverage you have during the year (count only the months where you have HDHP coverage on the first day of the month).
 
Contributions can be made as late as April 15 of the following year.
 
Using Your HSA
You can use the money in the account to pay for "qualified medical expenses" permitted under federal tax law.  This includes most medical care and services, and dental and vision care, and also includes over-the-counter drugs such as aspirin. 
 
You generally can not use the money to pay for medical insurance premiums, for any of the following:
 
            - any health plan coverage while receiving federal or state unemployment benefits
                    -   Cobra continuation coverage after leaving employment with a company that offers health insurance coverage
                    -   qualified long-term care insurance
                    -   Medicare premiums and out-of-pocket expenses, including deductibles, co-pays, and coinsurance for:
                              Part A (hospital and inpatient services)
                              Part B (physician and outpatient services)
                              Part C (Medicare HMO and PPO plans)
                              Part D (prescription drugs)
 
You can use the money in the account to pay for medical expenses of yourself, your spouse, or your dependent children.  You can pay for expenses of your spouse and dependent children even if they are not covered by your HDHP.
 
Any amounts used for purposes other than to pay for "qualified medical expenses" are taxable as income and subject to an additional 10% tax penalty.  Examples include:
 
                    -   Medical expenses that are not considered "qualified medical expenses" under federal tax law (i.e.:  cosmetic surgery)
                    -   Other types of health insurance unless specifically described above
                    -   Medicare supplement insurance premiums
                    -   Expenses that are not medical or health related
 
After you turn age 65, or become disabled, the 10% additional tax penalty no longer applies.
 
What Happens to My HSA When I Die?
If you are married, your spouse becomes the owner of the account and can use it as if it were their own HSA.  If you are not married, the account will no longer by treated as an HSA upon your death.  The account will pass to your beneficiary or become part of your estate (and be subject to any applicable taxes).
 
Opening your Health Savings Account
Banks, credit unions, insurance companies, and other financial institutions are permitted to be trustees or custodians of these accounts.  Other financial institutions that handle IRAs or Archer MSAs are also automatically qualified to establish HSAs.  If you cannot locate a local institution willing to establish your account, check links under "Resources" on the Treasury website.
 
Health Savings Accounts, Qualified Expenses
The following lists provide a brief summary of the information described in the Internal Revenue Code and IRS publication.  The lists are intended to serve as a quick reference to help determine whether or not an expense may be eligible for HSA reimbursement.  This information is provided with the understanding that the Tomei Agency is not providing tax advice.  Tax advice should be obtained from a professional tax advisor. 
 
Listed below are qualified medical expenses eligible for reimbursement:
Acupuncture
Alcoholism Treatment
Ambulance
Anesthetists
Artificial Limbs
Autoette (when used for relief of sickness and disability)
Birth Control Pills (by prescription)
Blood Tests
Braces
Cardiographs
Chiropractor
Christian Science Practitioner
Contact Lenses
Contraceptive Devices
Convalescent Home (for medical treatment only)
Crutches
Dental Treatment
Dental X-rays
Dentures
Dermatologist
Diagnostic Fees
Diathermy
Drug Addiction Therapy
Drugs (prescription)
Eyeglasses
FICA and FUTA (tax paid for medical care service)
Fluoridation Unit
Guide Dog
Gynecologist
Healing Services
Hearing Aid and Batteries
Hospital Bills
Hydro Therapy
Insulin Treatments
Lab Test
Lead Paint Removal
Legal Fees (to authorize treatment for a mental illness)
Lodging (away from home for outpatient care)
Metabolism Tests
Neurologist
Nursing (including board and meals)

Obstetrician
Operating Room Costs
Ophthalmologist
Optician
Oral Surgery
Organ Transplant (including donor's expenses)
Orthopedic Shoes
Orthopedist
Osteopath
Over the Counter Medication (OTC)
Oxygen and Oxygen Equipment
Pediatrician
Physician
Physiotherapist
Postnatal Treatments
Practical Nurse (for medical services)
Premiums (for long-term care insurance)
Premiums (for continuation coverage required by Federal Law (Cobra))
Premiums (for insurance received while receiving unemployment compensation)
Prenatal Care
Prescription Medicines
Psychiatrist
Psychoanalyst
Psychologist
Psychotherapy
Radium Therapy
Registered Nurse
Special School Costs (for the handicapped/challenged)
Spinal Fluid Test
Splints
Sterilization
Surgeon
Telephone or TV Equipment (to assist the hearing impaired)
Therapy Equipment
Transportation Expenses (relative to health care)
Ultra-violet Ray Treatment
Vaccines
Vasectomy
Vitamins (if prescribed)
Wheelchair
X-rays                                        
        
Expenses not eligible for reimbursement: 
Advance payment for services to be rendered next year
Athletic club membership
Autoette or special equipment
Automobile insurance premium allocable to medical coverage
Boarding school fees
Bottled water
Commuting expenses of a disabled person
Cosmetic surgery and procedures
Cosmetics
Cremation or burial expenses
Diaper service
Disability
Domestic help
Funeral
Health programs offered by a resort
Hotels Health clubs and gyms





Hygiene products and similar items
Illegal operations and treatments
Illegally procured drugs
Income protection
Loss of limbs
Maternity clothes
Premiums for life insurance
Sight or similar benefits
Scientology counseling
Social activities
Special foods or beverages
Swimming pool
Travel for general health improvement
Tuition and travel expenses for sending a problem child to a particular school
Weigh loss programs


Insuring: Gurnee, Waukegan, Zion, Mundelein, Libertyville, Grayslake, Antioch, Ingleside, Round Lake, Round Lake Park, Round Lake Beach, Beach Park and Great Lakes, Illinois as well as Kenosha, Racine and Pleasant Prairie, Wisconsin. Along with other areas in Lake County, IL and we are a short 40 miles north of downtown Chicago.

 

 





 
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Securities offered through Investment Planners Inc. Member FINRA/SIPC 226 W. Eldorado St., Decatur IL 62525, Tomei Insurance Agency is not affiliated with Investment Planners Inc

Insuring: Gurnee, Waukegan, Zion, Mundelein, Libertyville, Grayslake, Antioch, Ingleside, Round Lake, Round Lake Park, Round Lake Beach, Beach Park, and Great Lakes, Illinois as well as Kenosha, Racine and Pleasant Prairie, Wisconsin. Along with other counties in Lake County, IL and we're just a short 40 miles north of downtown Chicago.
 Check the background of this firm on FINRA’s 
 BrokerCheck<http://brokercheck.finra.org/Firm/Summary/18557>.
Check the background of this investment professional on FINRA’s
BrokerCheck<http://brokercheck.finra.org>.
 
223 N. IL Route 21 (at Washington St) | Gurnee, IL 60031
Toll Free: (877) 336-8595 | Local: (847) 336-8595 | Fax: (847) 336-6598 |Email Us
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