Important reminders about your Health Savings Account
Health Savings Accounts (HSA) are accounts for individuals and families covered by certain high-deductible health insurance plans. HSAs allow tax-deductible contributions and tax-free distributions if used for qualified medical expenses.
Here are important HSA reminders that will help you save time and money...
- HSA owners must use the dollars in their account for qualified medical expenses. Money withdrawn for an unqualified expense is taxable as income and, if withdrawn before age 65, subject to an additional 20%tax penalty.
- HSA owners are responsible for determining whether their HSA distributions (withdrawals)are qualified or nonqualified. For specific guidance, please refer to IRS Publication 502, which can be found at www.irs.gov, or consult your tax advisor.
- Document your HSA transactions by retaining your receipts and monthly account statements. You may only spend the balance available in your account.
- IRS rules prohibit an extension of credit (overdraft) on HSA accounts. Because of this IRS rule, overdrafts will result in account closure and IRS penalties. Ask about ways to prevent an overdraft on your HSA at your nearest 1st Source Banking Center.
- Once a year, 1st Source will send you a summary of your contributions (deposits) on IRS Form 5498-SA and your distributions (withdrawals) on IRS Form 1099-SA for tax purposes. You must report your use of HSA funds on Form 8889 and file it with your yearly tax documents.
- Each year the IRS determines maximum contribution levels for HSAs. Contributions above these levels can result in IRS penalties. Consult your banker or a tax advisor for current year contribution levels, or visit 1stsource.com/hsa.
- HSAs & Medicare: The IRS does not allow you to contribute to an HSA and also receive the health premium savings that Medicare provides. If you begin taking Social Security payments past the age of 65, you may receive up to 6 months of retroactive Medicare benefits. To avoid a tax penalty you must stop contributing to your HSA beginning with the first month you are enrolled in Medicare. Contact Social Security and your tax advisor to find out all the details regarding your situation.
Click here for more information or to open an HSA account.