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Allowable HSA Account Expenses

Given the cost of health care in the U.S. it can be beneficial to know what options are available to help make medical expenses more affordable, such as a health savings account (HSA).

  1. Identification

    • A health savings account is a tax-sheltered savings account. Individuals make contributions that can be later applied to qualified medical expenses. There are annual contribution limits: $2,900 (single) and $5,800 (family) (as of 2010).

    Qualified Allowances

    • A heath savings account can only be applied to prequalified expenses. Qualified expenses are expenses that cover medical and dental procedures and can be deducted, according to the Internal Revenue Service (IRS). These are expenses to pay for diagnosis, prevention or treatment of a disease or aliment. It further includes transportation costs and insurance premiums paid.

    Limitations

    • The holder of the heath savings account must be enrolled into a high deductible health plan (HDHP). In 2008, the minimum for HDHP was $1,100 (single coverage) or $2,200 (family coverage). Furthermore, withdrawals from a HSA that do not cover medical expenses will be taxed 10 percent (as of 2010).

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