Having a baby? Have an HSA first!

Opening, contributing to and/or maxing out a Health Savings Account (HSA) can come in handy when you’re having a baby. If you are enrolled in a High Deductible Health Plan (HDHP), you are eligible to open and contribute to an HSA. Here are a few things you might want to know about HSAs before welcoming your bundle of joy to the world:

1. Funds are tax free!

The contributions made into your HSA are free from income tax, and can also be free from payroll tax if done via payroll deductions. In this way, HSA funds can be used to pay for pregnancy and delivery expenses, giving you an extra tax savings compared to paying out-of-pocket.

2. You can use it on anyone in your tax family.

You can use your HSA to cover your or your spouse’s delivery costs, as well as future expenses of the child. HSA funds can be used on anyone within your tax family. This stays true even if the account holder does not cover a dependent under his or her health plan.

3. Can be used for medical expenses, as well as prescription, dental, and vision expenses.

 Kids are expensive! Aside from common sick visits that may require prescriptions, in a few years your little one may need glasses or braces. The good news is that HSAs can be used for all of those expenses! Medical costs, prescriptions, dental and vision related costs are all considered HSA eligible. Refer to IRS Publication 502 for more information on eligible HSA expenses.   

4. HSA funds roll over from year to year.

Speaking of upcoming expenses, it is important to note that even if you don’t spend everything you contribute into your HSA for the year, the balance remains there until you spend it. This means you will never lose your funds! They roll over from year to year and an HSA follows the same rules as a 401k once you reach retirement age.

5. The family maximum contribution is more than twice as much as the single contribution limit.

Although there is no limit to the balance of your HSA at any given time, the IRS does place limits on how much can be contributed per calendar year, and this limit is based on your age and insurance coverage type. If you have self-only coverage, the limit for 2017 is $3,400. If you have family coverage, the 2017 limit is $6,750. Furthermore, if you are age 55 or older, you can contribute an additional $1,000 per year beginning the year you turn 55.

6. Not enough funds? You can reimburse yourself later!

In the event that you have to pay a medical bill out of pocket, you can reimburse yourself from your HSA once enough money has accumulated in your account. This can be done for any expense incurred after your HSA account was opened. This allows you to take full advantage of the tax savings, even if you have an expense greater than the balance in your HSA at a given time.


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