Tax Facts: If you're not already funding your HSA, it's a great time to start

With 2020 underway, now's a good time to think about your plan for your health savings account (HSA) for the year. If you have an HSA-qualified high deductible health plan (HDHP), you can contribute up to $3,550 to your HSA in 2020. And if your HDHP covers at least one other family member, you can contribute up to $7,100 to your HSA. Plus, if you're age 55 or older, you can contribute an additional $1,000 on top of those limits.

That's a lot of money, and if you contribute it to an HSA, it's just going to be locked up where you can't use it, right? Not quite. If that's the reason you've been avoiding contributing to your HSA, it might be helpful to consider all of the ways that you can use money from your account today.

Everyday needs are covered

Do you ever buy things like bandages, sunscreen or contact lens solution? Did you know you can use the money in your HSA to buy a vast range of products that you're probably already buying? But if you contribute to your HSA and then withdraw the money to use it to buy HSA-eligible products, you get to use tax-free money.

Examples of how much that reduces the amount you have to earn to cover the cost are explained here; the short story is that if you don't pay with pre-tax funds, you're leaving money on the table.

Do you ever go to the doctor, emergency room, urgent care center, health clinic, or hospital, and end up getting a bill for the part your insurance doesn't cover? Again, you could be paying those bills — which you're going to have to pay anyway — with pre-tax dollars. You can put the money in your HSA and have it available to withdraw when you need to pay a qualified medical expense.

Is it a complicated process?

Withdrawing money from your HSA isn't hard from a logistical standpoint. Your HSA might come with a debit card or checkbook, which you can use to directly pay for your qualified medical expenses. If not, you can withdraw money online from your HSA, or take care of it at a local brick-and-mortar office, if your HSA provider has one available.

You must have receipts showing that you had valid medical expenses, but you just have to keep them for your own records! (Make sure you have a good system for this … like this one, for example.) You'll need to be able to provide them to the IRS if you're ever audited, but you probably don't have to send them to your HSA custodian in order to take money out of your HSA. So you don't need to worry about red tape when it comes to actually getting the money out of your HSA to pay your medical expenses.

Healthy? Stay that way...

But what if you're one of those people who never have any medical expenses at all? You don't go to the doctor, dentist, or chiropractor. You don't buy neti pots or first-aid kits or glucosamine. You've never had a health insurance claim at all. Why would you want to tie up your money in an HSA? This is one of those times when it's important to remember that medical expenses can appear seemingly out of the blue.

Remember when Jimmy Fallon caught his wedding ring on the corner of a counter and nearly lost his finger? The 10 days he spent in ICU would most definitely result in having to pay the out-of-pocket maximum on any health insurance policy. Having some money saved in your HSA means that you don't need to worry about how to pay those out-of-pocket costs.

[And as an aside, never visiting a doctor or dentist or spending any money on healthcare at all probably isn't a wise long-term strategy, since prevention is the best medicine..]

The takeaway here is that if you have an opportunity to fund an HSA, you probably should. That doesn't mean you need to contribute the maximum amount — any contributions are better than none. But when you put money into an HSA, you get an immediate tax break, and you give your future self a break from having to worry about how to pay medical bills.

Healthy selections


Tax Facts is a weekly column offering straight up, no-nonsense HSA tax tips, written in everyday language. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook and Twitter.


Tax Facts: When is the right time to take money out of your HSA?

The purpose of a health savings account (HSA) is to save tax-free funds to cover future medical expenses. But when is the right time to withdraw money from the account? Should you use your HSA funds to cover every medical expense you ever have, or only the big ones? Is it ever okay to withdraw money from your HSA for non-medical expenses?

The thing about personal finances is that it's just that -- personal. We all have different goals and circumstances when it comes to our money, and the situation gets even more complicated when you're talking about the intersection of finance and healthcare.

(Now, as you know, we're not financial professionals, nor should this piece be construed as financial advice. Because finances are so personal, you should definitely speak with a qualified tax or financial adviser before making spending decisions that fit your needs.)

But we are HSA holders, and have friends and family who are, too. As a general rule of thumb, we've seen that if you can afford to leave the money in your HSA, it's a good idea to do it. Unless it's truly an emergency, we've rarely seen any reason to withdraw money from your HSA unless you're using it to pay for a qualified medical expense.

Let's look at a few scenarios, based on some real-life examples to better understand HSA withdrawals:


Shawna gets her health insurance from her employer, and one of the options is an HSA-qualified plan. Shawna's employer also offers a more traditional plan with a lower deductible, but the out-of-pocket maximum is actually slightly higher than the out-of-pocket maximum on the HSA-qualified plan. And Shawna's employer also contributes $1,000 to her HSA if she enrolls in the HSA-qualified plan - a nice bonus!

Shawna knew that she was going to be having surgery this year. She doesn't have a lot of extra cash lying around, but she knew that regardless of which health plan she picked, she was going to have to pay the full out-of-pocket limit, which amounted to about $3,000.

So Shawna enrolled in the HSA-qualified plan. Her employer contributed $1,000 to her HSA, and she set up her payroll deductions so that she'd have enough money in her HSA to cover the out-of-pocket costs by the time she had surgery.

Should Shawna withdraw money from her HSA? Most likely, yes. She'll be using pre-tax dollars to pay her out-of-pocket costs, which saves her several hundred dollars. And since she doesn't have much in the way of other savings, the HSA is realistically the only choice.

In other words, that's why it's there! Shawna can withdraw the money, pay her medical bills, and focus on her recovery.


Aidan wants (needs?) a new car. The dealership will give him a better rate if he has a hefty down payment, but most of his money is tied up in his retirement account and his HSA. Aidan is healthy and doesn't anticipate medical expenses in the immediate future. Should he withdraw money from his HSA to pay for his new car?

Probably not!! If Aidan withdraws money from his HSA and uses it to buy a car, he's going to be in for a painful surprise when he files his tax return: He'll likely have to pay income tax on the money he withdrew, plus an extra 20% tax.

But there's an exception here to keep in mind. What if Aidan had been incurring modest medical bills ever since he opened his HSA, paying them with non-HSA money, and keeping all the receipts? He can tally up all the medical expenses he's paid since he opened his HSA (including the cost of things like sunscreen and bandages, as long as he's been keeping receipts), and reimburse himself for all of it at one time.

He can then use the money for whatever he wants — including the down payment on his new car — because he's really just reimbursing himself for medical expenses he's already incurred.

The importance of having accurate receipts here can't be overstated. Aidan absolutely shouldn't use this approach if he doesn't have proof that he's actually reimbursing himself for medical expenses incurred since he opened his HSA.


Maurice has been contributing to his HSA for a few years, but it's not his only liquid savings. He's also got a healthy bank account, and lives below his means. He finds out that he's going to need knee surgery, and his out-of-pocket expenses will be about $4,000.

Maurice can pull the money out of his HSA, just like Shawna did. But there's nothing that says he has to. Instead, he can choose to pay out-of-pocket costs using his other savings, and just let the HSA continue to grow, tax-free, over time. The money will be there when he needs it, and he can reimburse himself at any point in the future, just like Aidan. And if he's thinking very long-term, the money could even be used to pay for costly long-term care several decades down the road.

Those are just a few examples, but the takeaway point is that there's no single right answer when it comes to whether or not you should pull money out of your HSA. You might have heard people say that you'll be using your HSA to cover all of your medical bills below your deductible, and that might be the approach you need to take.

But it's not the only approach. The more you understand about HSA rules, the better you can plan the intersection between your finances and your health care — in the present, the future and the distant future.


Tax Facts is a weekly column offering straight up, no-nonsense HSA tax and account tips, written in everyday language. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook and Twitter.


Tax Facts: If HSAs seem "scary" the numbers might help

Does the idea of an HSA scare you? If so, you're not alone. Some people fear HSA-qualified plans because they have high-cost medical conditions and assume that they'll struggle to pay their medical bills. But sometimes it's just a general fear of "what if?" that holds people back from considering an HSA-qualified plan.

To be able to contribute to an HSA, you need to have an HSA-qualified high-deductible health plan (HDHP). That terminology — the "high-deductible" part — is sometimes enough to scare people away right off the bat. But what exactly does a qualified "high-deductible" mean?

It's clearly defined by the IRS

For 2020, an HDHP has to have a deductible that's at least $1,400 for an individual, or $2,800 for a family to be HSA-qualified. The deductible can be higher than that, but the maximum out-of-pocket costs (including the deductible) can't be higher than $6,900 for an individual, or $13,800 for a family.

On the higher end, those are certainly large amounts of money. But they're actually smaller than the maximum out-of-pocket limits that apply to all other plans. So, depending on the plans you're considering, the HSA-qualified HDHP might end up having lower total out-of-pocket exposure.

And on the lower end, a $1,400 deductible can't really be considered all that high anymore. Across employer-sponsored plans that have deductibles (which is most of them), the average deductible in 2019 is notably higher.

Some key differences...

Where an HDHP really differs from many traditional plans, however, is in how medical bills are handled before you've met the deductible. The HDHP can only cover preventive care before the deductible. Everything else, including office visits, urgent care visits, prescriptions, etc. is billed to you in full (at the network rate) until you meet the deductible.

In contrast, a traditional plan might have a deductible that applies if you're hospitalized or need surgery or lab work, but it might have copays instead for things like office visits and prescriptions. So, instead of paying the full cost when you go to the doctor, you might pay $40 and your insurance would pay the rest. With an HDHP, that doesn't happen. Instead, you pay whatever your plan's rate is for the office visit, and it counts towards your deductible.

Consider an HDHP, regardless of health

It's common to hear people say that an HDHP with an HSA is only a good option for people who are healthy. While it's true that healthy people tend to gravitate to HDHPs, the plans can also be a good choice for people who need a significant amount of healthcare. It's the people in the middle who might find that an HDHP with an HSA isn't the best option.

Let's say you're fairly healthy but see the doctor several times each year and take a few expensive prescriptions. You never meet the deductible or out-of-pocket maximum on your health plan, and all of the medical services you use during a typical year tend to have copays. You'd have to compare the premiums as well to be sure, but there's a good chance you'd better off with the traditional health plan.

But what if you've got a serious health condition that goes beyond things that tend to be covered by copays? Don't dismiss your HDHP options without giving them careful consideration. You might find that the maximum out-of-pocket costs aren't any higher — and might actually be lower — with the HDHP. And that's before we factor in the lower premiums, the tax savings, and potential employer contributions to the HSA.

Of course, there's also more to picking a health plan than just crunching numbers. Regardless of the math, the plan also has to let you sleep well at night, and the coverage that will do that is different for each of us.

Eligible comfort


Tax Facts is a weekly column offering straight up, no-nonsense HSA tax and account tips, written in everyday language. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook and Twitter.


Tax Facts: You can't afford to NOT fund your HSA

"HSAs are for rich people."

Maybe you've heard this before. Maybe you've assumed it. But let's clarify: HSAs are for anyone who has an HSA-qualified high-deductible health plan (HDHP), and who thinks they might have out-of-pocket medical expenses at some point in the future.

That's because HDHPs aren't as scary as they sound. The minimum deductible for an HDHP in 2019 is $1,350 for an individual, but this is actually lower than the average deductible for employer-sponsored health plans. According to the Kaiser Family Foundation's annual employer benefits survey, 85% of covered workers have deductibles, and the average deductible is nearly $1,600 for a single employee.

If you pick an HDHP, you'll likely find that your premiums are typically lower than they'd be for a traditional health plan with copays and a lower deductible. But you still have to contend with the out-of-pocket costs for your health plan, if and when you have a medical claim.

And although HDHPs tend to have higher initial out-of-pocket costs -- because all non-preventive care expenses are applied to the deductible, instead of being covered with copays -- it's common to see total out-of-pocket costs that are similar for both HDHPs and non-HDHPs.

In other words, if a serious medical condition arises, you're likely to face significant out-of-pocket costs regardless of whether you have an HDHP or a traditional health plan.

Funding your HSA

This is a big part of having a plan to deal with inevitable medical costs. It might be years before you actually have a significant medical claim, but that's the beauty of an HSA: The money will be there in your account until you withdraw it, since there's no "use it or lose it" provision with HSAs. And if you have your HSA through your employer and you leave your job, the HSA goes with you.

Once you've accumulated some money in your HSA, you'll have the peace of mind of knowing that you've got your own back when you run into unexpected (or expected) medical bills. And even if you switch to a non-HDHP in the future (and aren't allowed to make any more contributions to your HSA), you can still use the money that's already in the account to pay out-of-pocket costs on your new health plan.

"But how in the world am I supposed to go about stashing thousands of dollars in an HSA?!"

A journey of a thousand miles starts with a single step, and so does a solid cushion in your HSA. What if you committed to putting $50 into your HSA each pay period? If you get paid 26 times per year, that's $1,300 that you'll have contributed by the end of the year. If you don't end up having medical costs and can just leave it in your account, it can grow over time, either with interest or investment gains.

And keep in mind that the $50 you're contributing is pre-tax. If you're in the 25% tax bracket and you opt to just take the $50 in your paycheck instead, you'll only get $37.50, because Uncle Sam is going to take $12.50 of it. But if you contribute it to your HSA, you get to put in the whole $50.

And as long as you eventually use that money to pay for medical expenses — even if it's years or decades down the road — you'll never have to pay taxes on that $50, or on any interest or investment gains that you earn while it's in your HSA.

Particularly if your HSA allows you to invest the funds, your $1,300 per year in contributions could grow to five figures sooner than you might think. If you contribute $50 every two weeks to an HSA, earn an average of 4% on your investment, and don't need to withdraw money from the account, you'll hit $10,000 within seven years.

And in 20 years, you'll have nearly $40,000. Obviously, that's a very simplified example. Real-life investing tends to be a lot messier, and you should consult with a tax advisor before deciding what to do with your HSA funds. But instead of thinking about trying to save thousands of dollars in your HSA, ask yourself whether you can contribute $50 per pay period. Or $100. Or $25. Anything is better than nothing.

That's true even if your goal is just to cover current medical expenses, instead of accumulating a rainy day fund for future medical expenses. If you're anticipating a medical expense in the near future, you can put money in your HSA and take it right back out again to pay the bill, using pre-tax dollars rather than post-tax dollars.

If you owe a doctor $500 and you're in the 25% tax bracket, you'd have to earn $667 in order to pay the bill with post-tax money, because $167 of that money would go to taxes and the other $500 would go to the doctor. But if you use your HSA, you can earn $500, put it into your HSA, take it out to pay the doctor, and the money is never taxed.

The short story is that if you're eligible to contribute to an HSA, you can't afford to not contribute. Eventually, you're going to run into medical costs, and paying them with post-tax dollars is going to be a lot more expensive — and stressful — than using tax-free HSA funds.

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Tax Facts is a weekly column offering straight up, no-nonsense HSA tax and account tips, written in everyday language. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook and Twitter.


Tax Facts: Filing taxes with an HSA is easier than you think!

If you filed an extension for your 2018 taxes, your deadline is coming soon! But even if you're filing quarterly, or just getting ahead on your efforts for next year, know that your health savings account (HSA) offers fantastic tax benefits. People sometimes worry that having an HSA might make their taxes overly complicated. They wonder if there will be lots of paperwork involved, or if they'll need to hire a tax pro to help them sort it out.

There's no "one-size-fits-all" when it comes to taxes, but contributing to an HSA is not going to add much complexity to your tax situation. If you've been avoiding an HSA because of this, let's take a look at exactly how it would alter your tax return if you started contributing to an HSA...

Where do I start?

HSA contributions are reported on Line 25 of Form 1040. That's in the section where you get to deduct various things from your income, resulting in a lower adjusted gross income by the time you get to Line 37 (incidentally, if you buy your own high-deductible health plan and your income is too high to qualify for premium subsidies, contributing to an HSA might reduce your income enough to make you eligible for a subsidy).

If you use a tax software, it'll ask you a few questions and use your answers to calculate the number that goes on Line 25 — easy peasy.

But even if you do your taxes with a paper and pencil, figuring out what goes on Line 25 is pretty straightforward. You'll use Form 8889, which is fairly short and sweet as far as tax forms go (instructions for Form 8889 are here). Part I is where you report your contributions to your HSA, and Part II is where you report distributions (withdrawals).

The HSA contributions that you make directly to your HSA (outside of your employer's payroll system) are reported on Line 2. If your HSA contributions are deducted from your paycheck and/or your employer contributes on your behalf, those contributions should be listed on Line 9 instead. And Line 10 is where you'd report an IRA-to-HSA rollover — keeping in mind that you can only do that once in a lifetime.

Although those funding sources for your HSA are reported on different lines, the total amount can't exceed the maximum contribution limit for the year. In 2019, the cap is $3,500 if your high-deductible health plan covers just yourself, or $7,000 if it covers yourself plus at least one other family member (if you're 55 or older, the cap is $1,000 higher, and that adjustment is made on Line 3).

Part II only applies if you take money out of your HSA during the year (including withdrawing excess contributions if necessary). If you're taking the long-term approach with your HSA and just letting the money grow from one year to the next, Part II of your Form 8889 might be all zeros. But if you withdraw money during the year to pay medical expenses, this is where you'll report it.

The amount that you withdrew from your HSA goes on Line 14, and the portion of the withdrawals that you used for qualified medical expenses goes on Line 15 (make sure you have receipts to document all of the medical bills you paid — you don't have to send them to the IRS, but you'll need them if you're ever audited).

Keep in mind that if you withdraw money from your HSA and don't use it for qualified medical expenses, you'll have to pay income tax on that money.

And if you're under 65, you'll probably also have to pay an additional 20% tax, which is calculated on Line 17 of your Form 8889. But as long as all of the money you withdrew from your HSA was used for medical expenses, you'll have zeros on the lines pertaining to taxable distributions and additional tax.

But wait… how do you know how much you contributed to your HSA and how much you withdrew during the year? If you're not already keeping careful track of those amounts on your own (and saving all your medical receipts!), you should start now. But either way, your HSA custodian will have your back.

They'll send you Form 5498-SA, showing how much you contributed to your HSA. And if you made any withdrawals, they'll also send you Form 1099-SA, showing the amount of the withdrawals.

So there you have it. Form 8889 only takes a few minutes to complete if you're doing it by hand, and tax software will do it for you after you answer a few basic questions. Especially if you stick to the rules in terms of the maximum amount that you're allowed to contribute and make sure that you're only withdrawing money to pay for qualified medical expenses, your HSA tax reporting won't be too taxing.

As always, it pays to reach out to a professional tax preparer if you have any questions about your specific situation. But don't let a fear of complicated taxes scare you away from HSAs and miss out on the benefits they provide.

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Tax Facts is a weekly column offering straight up, no-nonsense HSA tax tips, written in everyday language. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook and Twitter.


Tax Facts: Should you shop in the exchange or outside the exchange?

Last week, we talked about the process of buying an HSA-qualified high deductible health plan (HDHP) in the individual insurance market. Today, let's take a look at some things you'll want to keep in mind when deciding whether you should buy your HDHP through the health insurance exchange in your state, or somewhere else.

There's no right answer to that question — it depends on your circumstances. But there are a few things to keep in mind that will help you decide:

Official = compliant

Every plan sold through the official exchange in your state is fully compliant with the Affordable Care Act (ACA). There are also lots of ACA-compliant plans that are sold outside the exchange. If you're shopping for an HDHP, it's going to have to be ACA-compliant, regardless of where you buy it.

But you need to be cautious when you're shopping outside the exchange, as there are also other types of coverage, like short-term plans and limited benefit plans, that people sometimes purchase without a full understanding of their shortcomings.

Open enrollment deadlines still apply

Both on-exchange and off-exchange, you can only buy ACA-compliant coverage (including HDHPs) during open enrollment, or during a special enrollment period if you experience a qualifying event.

For 2020 coverage, open enrollment in most states will run beginning in November, but could launch sooner. Some state-run exchanges have longer enrollment windows. But with the exception of Nevada, you cannot avoid enrollment window restrictions by shopping outside the exchange.

Cost savings are available

Premium subsidies to offset the cost of individual market plans are available in most cases if your income doesn't exceed 400% of the poverty level (here's what that looks like in terms of dollars).

If you're eligible for premium subsidies, you must shop in the exchange in order to get the subsidies. As recently as 2018, of the 10.6 million people who had coverage through the exchanges, more than 9.2 million of them were receiving premium subsidies that covered an average of 87% of their total premiums. And there's also an option to pay full price throughout the year and then claim the subsidy (which is actually just a tax credit) on your tax return.

But in either case, you can only get your subsidy if you buy a plan through the exchange. If you shop off-exchange and then you end up with a subsidy-eligible income after all, you're just out of luck.

Special circumstances can be accommodated

Premium subsidies are available to people in all sorts of circumstances. Maybe you have a large family, or maybe you're a young adult just starting your career. Maybe you're a single parent, or maybe you're an early retiree looking for health coverage for the years before you're eligible for Medicare… whatever your circumstances, you may find that you're eligible for premium subsidies.

For the record, eligibility extends well into the middle class: A family of four will qualify for premium subsidies in 2019 with an income of over $100,000.

It's worth it to shop around

If you're NOT eligible for premium subsidies -- perhaps because you have a qualifying offer of coverage from your employer, or because of the family glitch, or even because your income is above 400% of the poverty level -- you can shop in or out of the exchange, since you'll be paying full price for your coverage either way.

But if you have your heart set on a silver-level plan and you're not eligible for a subsidy, you might find that the silver-level plans outside the exchange are less expensive than the silver-level plans inside the exchange. If you're not subsidy-eligible and you want a silver plan, you'll want to look at the off-exchange options alongside the on-exchange options to make sure you're getting the best value.

But be aware that if you buy an off-exchange plan, you can't change your mind mid-year if your income changes and you become subsidy-eligible (unless you also experience a qualifying event).

Expect some big differences in plan options

The available options, both in the exchange and outside the exchange, vary considerably from one area to another, even within a single state. Don't assume anything, and don't base your decisions on what you've heard from a friend who lives elsewhere or who has different circumstances.

Many insurance companies offer their plans both on- and off-exchange, but some only offer on-exchange plans while others only offer off-exchange plans. To see your full range of options, you'll need to compare both.

Most people who are eligible for premium subsidies can ignore the off-exchange options, but there are circumstances in which it might make sense to forfeit your premium subsidy and buy an off-exchange plan instead. An example would be a person in the midst of cancer treatment who discovers that the only insurers providing in-network coverage of the person's oncology center are off-exchange.

In that case, the applicant might decide it's worth losing out on their premium subsidy in trade for having in-network coverage of their preferred cancer treatment center. Every aspect of health care is personal, and that includes the decisions you make about what health plan to buy and where to buy it.

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Tax Facts is a weekly column offering straight up, no-nonsense HSA tax tips, written in everyday language. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook and Twitter.


Tax Facts: Shopping for an HDHP in the health care marketplace

Is it possible to set up a health savings account (HSA) and save tax-free money to pay your future medical bills, even if your job doesn't offer health insurance benefits? Yes! You can purchase an HSA-qualified high-deductible health plan (HDHP) in the individual market, which is where people buy coverage if they don't have access to an employer-sponsored plan or a government plan like Medicare or Medicaid.

There are a few counties where HDHPs aren't available in the individual market, but that's exceedingly rare. For today, we'll be talking about the vast majority of the country, where HDHPs can be purchased by an individual shopping for health insurance.

How do you shop for your own health insurance?

If you're buying your own health insurance, you can either shop in the Patient Protection and Affordable Care Act (ACA) created health insurance exchange — also known as the marketplace — in your state, or you can buy a plan "off-exchange" which just means that you're buying it directly from the insurance company (note that there's no option to buy off-exchange plans in the District of Columbia; all individual market plans there are sold through the exchange).

Regardless of whether you're using the exchange or buying off-exchange, you can have a health insurance broker help you with the process if you prefer, and there are other enrollment assistants who can help you with the process of purchasing coverage in the exchange.

In 39 states, the health insurance exchange is DC and the other 11 states operate their own health insurance exchanges, but you can get to them by starting at

When you select your state or enter your ZIP code, if you're in a state that runs its own exchange you'll see a notice directing you to your state's exchange, and clicking on the notification will take you to the correct website. So you can't go wrong by starting at

But be aware that there are lots of private websites that could easily be mistaken for the official exchange. Some of them are web brokers that work with the official exchange and can get you enrolled in an exchange plan. But others are selling plans that aren't regulated by the ACA.

All currently-available HDHPs must be compliant with the ACA, regardless of whether they're sold through the exchange or not, so non-ACA-compliant plans, like short-term health insurance, won't help you in your quest to get a plan that's HSA-qualified. If in doubt, starting with is a good way to know for sure that you're in the right place if you want to buy a plan through the exchange.

If you want to buy a plan outside the exchange, you can do that by contacting a reputable broker who can show you all of your options, or by directly contacting the various insurers that offer individual health insurance coverage in your area (the insurance department in your state can provide you with details about which insurers offer plans).

How do you find an HDHP?

If you're working with an insurance broker, you can just tell them that you want an HDHP and they'll narrow down your options so that the only plans they show you are HDHPs. Then they can help you compare premiums, out-of-pocket costs, provider networks, and formularies (covered drug lists) to figure out which one would work the best for you.

If you're shopping on your own, and most of the state-run exchange sites have an option that will let you filter the plans so that you're only shown HDHPs

(On, you do this by clicking on "refine results" after you see your plan options. Then you'll be able to select "health savings account eligible." Once you apply that filter, the non-HDHPs will be removed from the plans choices that you see.)

HSA-qualified plans generally have the term "HSA" somewhere in their name or near the top of the plan details, but you might have to search to find it. If in doubt, you can call the insurance company to verify that the plan you're considering is indeed HSA-qualified. Keep in mind that there are specific rules for HSA-qualified HDHPs — it goes beyond just having a high deductible.

Stay tuned next week, when we'll take a look at how you can decide whether you should buy your HDHP through the exchange or off-exchange.

Once you're enrolled...

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Tax Facts is a weekly column offering straight up, no-nonsense HSA tax tips, written in everyday language. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook and Twitter.


Tax Facts: Can you have more than one HSA?

This is a very common question from our customers, so let's lead with the short answer: Yes, you can have more than one health savings account (HSA). But it's important to understand the pros and cons of having multiple accounts, to make sure that you stay in compliance with IRS rules.

HSAs cannot be jointly owned

If two spouses have coverage under one HSA-qualified high deductible health plan (HDHP) and meet the rest of the IRS requirements for HSA eligibility, they can establish an HSA in one partner's name and contribute up to the family maximum amount to that spouse's HSA.

A person with individual HDHP coverage can contribute up to $3,450 in 2018 to their HSA, and a person with family HDHP coverage can contribute up to $6,900. These amounts will be raised to $3,500 and $7,000 in 2019.

But they also have the option for each spouse to establish their own HSA, and split up the family maximum contribution how they prefer. The IRS notes that the default is to split the contribution limit equally between the two spouses, "unless you agree on a different division."

In this case, each spouse would have their own HSA, but the funds in each HSA could be used for any eligible family members. From a practical standpoint, the family has multiple HSAs, even though each one is technically owned by a single person.

But what if you're single?

Could you have more than one HSA? Again, the answer is "yes." And the family we just considered could have more than two HSAs, if one or both spouses opted to have multiple HSAs.

As long as you have an HSA-eligible health plan, there's no limit on how many HSAs you can have. As far as the IRS is concerned, the only limit is how much money you can contribute to your HSAs each year. You can contribute it all to one HSA, or spread it out across two or more accounts.

Maybe you just want to use more than one brokerage firm or bank. Maybe your employer will contribute some money to your HSA that's established with your employer's preferred HSA administrator, but you'd also like to contribute to an account with one you choose -- maybe one that offers different investment options.

Maybe you have an HSA from a previous employer and you're happy with the HSA administrator, but your new employer offers an HSA from a different one, and you want to maintain both accounts.

A few things to keep in mind...

You can't contribute more than the maximum amount the IRS allows for a given year, regardless of how many HSAs you have. And contributions made by anyone else, including your employer, count towards your total limit.

If you and your spouse both have family HDHP coverage, the family limit applies to your combined contributions. Please note that if you have an adult child who is on your HDHP but not considered a tax dependent, they can contribute to their own HSA (and are not eligible as a dependent under your family HSA as they must be a qualified tax dependent), but it doesn't count against the total family contributions you can make, since they file their own tax returns.

If you have an HSA through your employer, you might to be able to avoid income taxes and payroll taxes on any contributions you and/or your employer make to that HSA by contributing pre-tax from pay. If you choose to have another HSA with a different HSA administrator and make your own contributions to it (outside of your employer's payroll system), you'll be able to deduct those contributions on your tax return. When you do that, you'll avoid income tax on the contributions, but you can't avoid payroll tax.

Keeping careful records is a must if you're using an HSA, since the responsibility is on you to prove everything was done correctly if you're ever audited. And if you're using multiple HSAs, the need for careful record keeping is especially important.

You'll need to make sure that you have receipts for the total amount that you're withdrawing from your HSAs, and ensure that there's no double dipping: If you reimburse yourself for a medical expense using one HSA, you can't then reimburse yourself for the same expense from a separate account.

HSA-eligible best-sellers!


Tax Facts is a weekly column offering straight up, no-nonsense HSA tax tips, written in everyday language. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook and Twitter.


Tax Facts: What happens to HSA contributions when you drop your HDHP?

Last week we looked at how HSA contribution limits work if you enroll in an HSA-qualified HDHP mid-year. But what if you drop your HDHP coverage mid-year? Or what if you get married, divorced, or otherwise change your HDHP coverage, in the middle of the year? Don't worry — the IRS has rules for all those situations, too.

If you drop your HDHP coverage mid-year...

...or become ineligible to contribute to an HSA for any other reason, the short answer is you have to stop contributing to your HSA at that point.

Your contribution limit for the year will be prorated based on the number of months that you were eligible to make HSA contributions. There are a couple of points to keep in mind here:

As long as you have HDHP coverage and are otherwise HSA-eligible on the first day of a calendar month, you're considered HSA-eligible for that whole month. So, if you had an HDHP from the first of the year through August 15, you're allowed to contribute 2/3 of the total annual contribution limit, since you're considered HSA-eligible for all of August.

Also, you don't have to actually make the HSA contributions during the months you had HDHP coverage. You have until your tax return is due (typically April 15 of the following year) to make some or all of your HSA contribution. The current full-year contribution limit for a someone participating in the HDHP as a single individual under age 55 is $3,500.

What if your HDHP status changes?

The HSA contribution limits are higher if you have family HDHP coverage: $7,000 in 2019. But the switch between self-only coverage and family coverage rarely corresponds to your New Year's bash.

So how does the HSA contribution limit work if you add a family member to your HDHP mid-year? The last-month rule — with a testing period — that we described last week would apply in this situation, or you can use the prorated method of calculating the contribution limit.

A few examples...

Let's say you have self-only HDHP coverage from January through September 2018, and then you have a baby in October and add your little one to your HDHP. So for October, November, and December, you have family HDHP coverage.

To show you what we mean, let's crunch a few numbers. You have two options for calculating your HSA contribution limit:

  • Prorated contribution limit: Based on the $3,500/$7,000 annual contribution limits, 9 out of 12 months of self-only coverage would be $2,625. And 3 of 12 as a family is $1,750. Adding those together, you get $4,375.
  • Using the last-month rule, you get to make the full contribution based on whichever type of HDHP coverage you had on December 1. In this case, it's family HDHP coverage, which means you get to contribute $7,000 to your HSA for 2019.
  • Keep in mind -- then you have to maintain HDHP coverage throughout all of 2020. If you don't, you'll have to pay income tax and an additional 10% tax on the difference between $4,3750 and $7,000.

Now let's say you have family HDHP coverage from January through May, and then have a life-changing event, and switch to self-only HDHP coverage for the remainder of the year. In this case, you'd just use the prorated method for determining the contribution limit.

Family essentials

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Cara Lower Back Heating Pad

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Tax Facts is a weekly column offering straight up, no-nonsense HSA tax tips, written in everyday language. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook and Twitter.