Spending money on health care isn’t fun, but there is a way many of us can get a break on those costs thanks to the tax benefits of a Health Savings Account (HSA). An HSA is just what the name implies: a savings account to help pay for qualified medical expenses. It also offers you tax advantages. An HSA is intended to help individuals and families offset the growing costs of health care. To be eligible for an HSA, you must have a health insurance plan with a deductible of at least $1,300 for an individual and $2,600 for a family.

An HSA is like an individual Retirement Account (IRA): you open your HSA and you own it. So, whether you change jobs or are self-employed, your account stays with you. It offers triple tax benefits: contributions to an HSA are tax-deductible from your adjusted gross income. Thus, an HSA can lower your adjusted gross income and reduce your taxable income. Funds in an HSA grow tax-free. And distributions for qualified medical expenses are not taxed.

An HSA account can grow from year to year. Unlike a Flexible Spending Account, an HSA is not “use it or lose it.” Your balance can continue to grow year after year. If you don’t use funds, they stay in your HSA each year. They also continue to earn tax-free interest. At the age of 65, consumers can withdraw the money for non-qualified expenses and just pay the income tax like a traditional IRA distribution.

Each year, you decide how much to contribute to your HSA account, although you cannot exceed the government-mandated maximum. In 2017, these limits are $3,400 for an individual and $6,750 for a family; adults over 55 can add up to $1,000 more. You will receive a debit card or checks linked to your HSA balance, and you can use the funds on eligible medical expenses. These include deductibles, copays and coinsurance, plus other qualified medical expenses such as dental and vision-related costs.

An HSA normally cannot be used to reimburse the cost of health insurance premiums. An exclusion to this rule is the cost of COBRA. For those people who have parted from their employer and are relying on COBRA for health insurance, the premium costs can be reimbursed from an HSA. An HSA also can be used to pay for Medicare Part B or Part D and Medicare Advantage premiums, so long as you are 65 or older. You can arrange for an HSA through a bank, an insurance company, or a mutual fund company.

If you have questions, call me at the Maine Lobstermen’s Association office at 967-4555 or send an email to