What is HSA?
One must know how to use HSA to pay off Medical Debt. HSA is called Health Savings Account, which is an account that is free from tax regimes. This account is used for medical purposes, which doesn’t get included while the calculation of tax is done. The advantage of making this account is only available to those who are covered under the HDHPs.
HDHP is the High Deductible Health Plans, which saves the medical expenditures that are not covered by the HDHP plans. The employees or the employers’ contribution, which has a limit for each year, makes this HSA. This amount in the HSA can be used for medicine and for paying other qualified medical expenses.
Tax Advantages of an HSA
HSA is very advantageous for most people. Like every coin has two sides, HSA has negativities as well, but the advantage is more important. The contribution of funds can be tracked and planned for HSA. The fund that is contributed to HSA gets deducted during tax calculations. This reduction makes the tax amount lesser to some extent. HSA is 100% tax-deductible, and that is the best advantage of having HSA for supporting medical expenses.
How to Use an HSA to Pay Medical Debts
1. Automatic creation of savings
If you direct your HSA from your work itself, then the process will be automated. The contribution from your side will get automatically deducted from the paycheck. One can save the maximum amount of $288 for individuals and $575 for the family by making use of HAS.
2. Enrolling in an HDHP
For being eligible to save, one must have a high deductible plan. HDHP that one should have must be of at least $1,350 for one person annually. For the family plan, the minimum must be $2,700 annually.
3. Start saving by opening an HSA
If an individual or a family is enrolled in a High Deductible plan, then they become eligible to create HSA. Using HSA, a family can save up to $7,000 and $3,500 for an individual.
4. By taking your first tax break
If a person saves approximately $400, that is a good amount of savings. When the money is put in the HSA, then it is tax-deductible. So, the amount you contribute must also be reported to the IRS for getting the tax return.
5. Check and understand your options of investing and savings
Many people are do not keep any emergency funds separately for medical purposes. Many are completely dependent on the money of HSA. They might think that savings is done, and they can also invest it. When the HSA owner feels that investing can be a good option, he can do so.
6. Pay your medical debts by withdrawing money from your HSA
There is a list of medical expenses qualified for being paid from the HSA. The HSA money withdrawn is also tax-free.
