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A health savings account can be a great way to reduce taxes and pay for healthcare, but not everyone qualifies. See how to get an HSA this year. [[{“value”:”
If you want a better way to pay for out-of-pocket healthcare costs while saving money on taxes, opening a health savings account (HSA) is a great strategy. But not everyone is allowed to open an HSA. To qualify for a health savings account, you need to have the right kind of health insurance, known as a high-deductible health plan (HDHP).
If you have an HDHP and have not yet opened an HSA, you should really consider opening an account in 2024. A health savings account can be a great way to reduce your taxable income, save money for healthcare, and even invest extra money for retirement.
Let’s look at a few reasons why a health savings account is such a valuable tax benefit, and why you should open an HSA (if you qualify) in 2024.
Why a health savings account (HSA) can save you money on taxes
Here’s why the health savings account is so valuable: It lets you deduct thousands of extra dollars from your taxes. The HSA is an “above the line” tax deduction, like traditional IRA contributions. An HSA is an extra place to put money that reduces your taxes, even if you’re already maxing out your IRA and 401(k). No wonder some people envy HSA owners.
In 2024, here’s how much you can put into an HSA (and deduct from your income on your tax return) based on whether you’re single or have family health insurance coverage:
Single: $4,150Family: $8,300
And if you’re going to be 55 or older in 2024, you can put an extra $1,000 into your HSA — or an extra $1,000 for each spouse over 55 in a married couple with family coverage.
How to qualify for an HSA
There are no limits on income for opening an HSA and getting the full amount of tax deductions. However, if you want a health savings account, you need to have the right kind of health insurance. Only high-deductible health plans qualify for health savings accounts. In 2024, according to IRS rules, here’s what your insurance plan needs to look like to get an HSA:
Not all health insurance plans qualify for an HSA. Some insurance plans might have coverage that’s “too good” to qualify for an HSA (with low or zero deductibles). Others might have an annual out-of-pocket max that is “too high” for an HSA.
If you get pretty comprehensive, generous health insurance from your job, you might not be able to use an HSA. Or if you choose a lower-premium health insurance plan that covers catastrophic healthcare expenses, but asks you to pay for most of your own routine healthcare costs, your plan’s deductible might be too high to qualify for an HSA.
Qualifying HDHPs that are HSA-eligible will usually advertise this in brochures, websites, or other materials given to you during annual enrollment at work. If you buy health insurance for yourself or your small business through an insurance agent, ask to see your options for HSA-eligible plans.
HealthCare.gov also offers a filter option to see HSA-eligible plans in your search results when looking for health insurance. Not all health insurance plans on HealthCare.gov qualify for an HSA, but you can find HSA-eligible plans at the Gold, Silver, or Bronze levels.
Is it too late to open an HSA in 2024?
Annual open enrollment for 2024 has already ended, as of Jan. 16, 2024. But if you have an HDHP for 2024, you can open a health savings account anytime. Don’t ignore this great tax benefit for 2024. You can put money into your HSA for 2024 anytime between now and the April 2025 tax deadline — just like an IRA, you can make “prior year” contributions to a health savings account. Start planning now to make the most of your HSA in 2024.
What if your current health insurance plan is not HSA-eligible?
If you get a new job in 2024, you can try to get an HSA-eligible insurance plan through your new employer. Or if you have other big life changes in your family in 2024 (like a marriage, divorce, moving to a new home in another ZIP code, and a few others), you can qualify for a special enrollment period and switch to a different insurance plan that will let you get a health savings account.
Bottom line
Using a health savings account (HSA) is an excellent strategy for your personal finances because it lets you pay for healthcare costs and increase your tax deductions. Check to see if your insurance plan is HSA-eligible — if so, open an HSA in 2024 and try to put in the maximum amount that you’re allowed.
If your insurance plan is not HSA-eligible, you might want to consider switching to an HDHP. Plan ahead for the next open enrollment period in Nov. 2024–Jan. 2025.
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