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Millions of Americans use a health savings account, or HSA, to save for medical costs. But, are you getting the most out of your HSA? Gilmore Jasion Mahler CPA Charlie Heid recently tackled the topic in his monthly appearance on WTOL-TV.

The HSA or health savings account is a way to save money for medical expenses for people who have health coverage through a high deductible health plan.

You can pay for things like:

• Doctor’s visits & copays
• Surgery
• Dental work
• Flu shots

Unlike a flexible spending account, or FSA, which some people may get confused with an HSA, the HSA balance rolls over from year to year, and if you change jobs you can take your HSA with you.

Health savings accounts are referred to as a triple-tax free way to save… and here’s what that means:

1. Your money goes into the account before its taxed
2. It grows in the account tax deferred
3. You can withdraw the money tax-free to pay for medical expenses

But there’s another benefit of the HSA that many people may not be aware of: when you turn 65 the HSA works like a traditional IRA. At 65 and older you can take money out and use it for whatever you want (not just medical expenses), though you would have to pay taxes on it when you do. But, you can still use that money tax-free for medical expenses in retirement.

There are some limits to what you can put into an HSA on an annual basis. They’ve actually gone up a bit in 2019 from 2018. A single person can put in up to $3,500 a year and a family can put in up to $7,000 per year.

If you’re 55 or older you can put in an extra $1,000 as a so-called catch-up contribution. That’s to help people who are nearing retirement age who feel they haven’t saved enough.

HSAs can be a powerful tool in saving for retirement. They can actually be invested in mutual funds to grow even further. If you do automatic payroll deduction for your HSA, unlike your 401(k) or IRA, that money isn’t subject to a federal income tax known as FICA, or the Federal Insurance Contributions Act, which goes toward Social Security and Medicare.

If you invest your HSA balance, be aware that some organizations can charge pretty big fees and some also have a required minimum balance before you’re allowed to invest.  

Some other things to keep in mind:

• If you do invest your HSA, be sure to consult an expert so that you invest wisely
• You can change the amount of your HSA contribution whenever you want, as long as you don’t go over the annual contribution limit
• You need to keep receipts so that, if need be, you can prove that the medical expenses meet IRS requirements
• Finally, other people can contribute to your health savings account. You can contribute separately from your payroll deduction. Your employer, family members or anyone else can also contribute as long as you stay below the annual contribution limit

CPA Charlie Heid is a partner specializing in tax services. He has been with Gilmore Jasion Mahler for 17 years and appears monthly on WTOL 11 Your Day to cover tax and money topics.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.