What is an HSA (Health Savings Account)?
A health savings account (HSA) is a tax-exempt trust or custodial account that you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA.
No permission or authorization from the IRS is necessary to establish an HSA. When you set up an HSA, you will need to work with a trustee. A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. The HSA can be established through a trustee that is different from your health plan provider.
If you have an Archer MSA you can generally roll it over into an HSA tax free.
To be an eligible individual and qualify for an HSA, you must meet the following requirements:
- You must be covered under a high deductible health plan (HDHP) on the first day of the month.
- You have no other health coverage except what is permitted.
- You are not enrolled in Medicare.
- You cannot be claimed as a dependent on someone else's tax return.