Contributing to a Health Savings Account (HSA)

If youre thinking of starting a health savings account, more commonly referred to as an HSA, you may be wondering how you contribute to it. Contributing to an HSA is fairly straightforward.

First of all, you must qualify for an HSA by being a participant in a high-deductible health plan (HDHP). For 2008, the minimum deductible amount to qualify for classification as an HDHP is $1,100 for single people, and $5,800 for families. Once youve determined that you are eligible to open an HSA, you can create one on your own or through your employer. Your employer will make contributions to your HSA every time you are paid, by deducting an amount of your choice and putting it into your HSA. These contributions are made on a pretax basis, meaning they come from your gross income. When you have money taken out of your paycheck and put into your HSA, you are lowering your taxes. For example, if you make $50,000 a year, and have $5,000 taken out of your paychecks, you will be lowering your gross, pre-tax income to $45,000. That will put you in a lower tax bracket, and that means you will be paying less in taxes than if you were making $50,000. Additionally, all money that goes into an HSA, whether the contributions come from you or your company in the form of a matching contribution, are yours.

In 2009, the maximum that people can contribute to their HSAs is $3,000 for single people, and $5,950 for families.

To learn more about contributing to your HSA, be sure to sit down with a financial adviser, qualified member of the health insurance industry, or a representative of your companys human resources department. They could answer any and all questions you have about contributing to an HSA.