A Health Savings Account (HSA) is a special type of savings account that allows you to set aside money specifically for medical expenses if you have a high-deductible health insurance plan.

High-Deductible Health Plan (HDHP): A HDHP is a type of health insurance plan with a higher deductible (the amount you pay for covered health care services before your insurance plan starts to pay) than traditional health plans. To be eligible for an HSA, you must be enrolled in an HDHP.

Tax Benefits: The money you contribute to your HSA is typically tax-deductible, meaning you can reduce your taxable income by the amount you contribute. Additionally, any interest or investment gains earned on the money in the HSA are usually tax-free.

Savings for Medical Expenses: The funds in your HSA can be used to pay for qualified medical expenses, such as doctor’s visits, prescription medications, and certain medical procedures. It’s a way to save for these expenses with pre-tax dollars.

Portability: Unlike some other types of health-related accounts, an HSA is portable. This means you can keep it even if you change employers or health insurance plans, and the money in the account rolls over from year to year.

There are limits to how much you can contribute to an HSA each year, and these limits are set by the IRS. It’s a good tool for managing healthcare costs while also providing some tax advantages. If you have an HDHP, consider exploring whether an HSA might be a good fit for your financial strategy.