Health Savings Accounts (HSAs) offer individuals a tax-advantaged way to save for qualified medical expenses. However, not everyone is eligible to open an HSA. In this article, we'll delve into the eligibility criteria for opening an HSA, helping you understand if this valuable healthcare savings tool is right for you.

Health Savings Account Basics

An HSA is a financial account that allows individuals to save for medical expenses with pre-tax dollars. To qualify for an HSA, you must meet certain criteria, and these criteria involve both your health insurance coverage and your tax status.

Eligibility Criteria:

High Deductible Health Plan (HDHP): The primary requirement for HSA eligibility is being covered by a High Deductible Health Plan. This is a health insurance plan with a higher deductible than traditional plans. For the tax year 2024, the minimum deductible for an HDHP is $1,600 for individuals and $3,200 for families, reflecting an increase of $100 and $200, respectively, from the 2023 limits.

Plan Type: The health insurance plan must meet the specific requirements outlined by the IRS to be considered an HDHP. Confirm with your insurance provider that your plan qualifies.

No Other Health Coverage: You generally cannot have other health coverage that is not an HDHP. Exceptions include certain types of insurance, such as dental, vision, or accident coverage.

Not Enrolled in Medicare: Individuals who are enrolled in Medicare are not eligible to contribute to an HSA. If you are planning to enroll in Medicare, it's essential to stop contributing to your HSA at least six months before your Medicare coverage begins.

Not a Dependent: If someone else claims you as a dependent on their tax return, you are not eligible for an HSA. This applies even if you meet all other criteria.

Under 65 Years of Age: You must be under the age of 65 to open or contribute to an HSA. Once you reach age 65, you can still use your HSA for qualified medical expenses, but you are no longer eligible to contribute.

At RetireBetter, we understand the importance of making sound financial decisions for your future. If you meet the eligibility criteria for an HSA and want to explore how it can benefit your overall retirement strategy, our team of experts is here to assist you.