A health savings account (HSA) is an account set up for individuals covered under a high-deductible health plan (HDHP). Intended to help pay for medical expenses not covered by the latter, it also offers three tax advantages: deposits are tax deductible, interest earned is tax-free, and withdrawals are also tax-free, provided they are put toward qualified medical expenses.
To qualify for an HSA, an individual must have a HDHP and must not be listed as a dependent on another person's tax return or enrolled in Medicare. You or your employer make contributions, which have a maximum annual limit, and the contributions are then invested. You can use the funds to pay for medical expenses that qualify, including dental, vision, and over-the-counter drugs.
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