1. Tax Savings
Contributions you make to the HSA, up to the annual limit, are tax deductible. Likewise, any contributions made by your employer are excluded from your gross income ("pre-tax").
2. Full Rollover
All contributions remain in your HSA indefinitely until you use them. There is no penalty if you don’t use the money, and it rolls over year to year.
3. No Tax on Qualified Withdrawals
Withdrawals used to pay qualified medical expenses for you, your spouse, and your dependents are never taxed. And, interest you earn on the account accumulates over the years tax-deferred, and if used to pay for qualified medical expenses is tax-free.
The account is portable and yours to keep. It stays with you if you change employers or leave the workforce.
1. Contribution Limits
With Health Savings Accounts there are annual contribution maximums which limit how much you can contribute each year.
2. Eligibility Requirements
To contribute to a Health Savings Accounts, you are required to be enrolled in an HSA-Qualified High-Deductible Health Plan.
3. Complicated Rules
With HSAs, the individual is the plan administrator. As such, many individuals find the rules and recordkeeping of HSAs to be complicated and cumbersome.