A Health Savings Account is a savings account that is tax-advantaged and belongs to you. It can be paired with a qualified high-deductible health plan, as well. You can make contributions to this plan through the 2014 tax year until April of 2015. If the limit for the HSA is met, the IRS will reduce the overall amount the employee has to pay in federal income tax.

The Limits

Single – The Minimum Deductible is $1,250 – Maximum for Out-of-Pocket is $6,350 – The Contribution Limit is $3,300 – The 55+ Additional Contribution Amount is $1,000
Family – The Minimum Deductible is $2,500 – Maximum for Out-of-Pocket is $12,700 – The Contribution Limit is $6,550 – The 55+ Additional Contribution Amount is $1,000

The maximum deductible did not change from the 2013 limits; the out-of-pocket amount increased by $100 for a single person and $200 for a family from 2013; the contribution limit was increased an extra $50 for a single person and $100 for a family; and the amount for those 55+ did not change from 2013.

If the HSA is used to cover medical expenses that are not qualified, there is a tax penalty of 20 percent of the distribution throughout 2014. Once the savings amounts are deposited, they then belong to the individual. The adding and removal of the funds has to be authorized through the employee and not the employer. There are also requests that have to be done through the employee as well such as requesting a new card or changing an address.

More on HSAs

This is a financial account that is opened through an individual or a family in order to pay for qualified medical expenses incurred throughout the year. There are federal regulations that require a minimal deductible on the plan that you choose. HSAs combine traditional insurance, along with a Roth 401(k) and IRAs, to use for your medical expenses. Those taxpayers can then receive 100 percent on their income-tax deduction on their salary each year. Taxpayers will not be penalized when it comes to reimbursing themselves for or deferring medical expenses.