How Do HSAs Work?

Answers to questions about health savings accounts.

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By Denise Logeland

Health savings accounts (HSAs) are a handy way to save for medical expenses and reduce your taxable income. They work just like your other personal bank accounts in many ways. One big advantage of opening an HSA versus tapping your regular bank accounts to pay medical bills: “Triple tax savings,”1 says Betsy Whisler, senior vice president of consumer banking at Thrivent Federal Credit Union. “You make contributions that are tax-deductible, and you have tax-free earnings and tax-free withdrawals when the money is used for qualified health care costs.”

Who can have an HSA?

Anyone who has a high-deductible health care plan. “High deductible” is defined by the IRS. Your health insurance provider can tell you if you have a qualifying high-deductible plan. To be eligible, you cannot have any other health insurance coverage (including Medicare), and you cannot be claimed as a dependent on anyone else’s tax return.

How do I open an account?

You can do this on your own, just as you would open other bank accounts. Many financial institutions offer HSAs. If you have high-deductible health insurance through your employer, you might be able to set up an HSA through your employer, too. But remember, the account belongs to you, not to your employer.

How much can I contribute to my HSA?

The maximum allowable contribution is subject to change each year. In 2019, it was $3,500 for an individual and $7,000 for a family. People over age 55 were allowed to make a catch-up contribution of an additional $1,000 annually. If you don’t use the contributions, the money rolls over to the next year.

How do I pay health care bills from an HSA?

Depending on the financial institution where you have your HSA, you might have any or all of these options: writing a check, paying by debit card, or paying from your regular checking or savings account and then transferring funds from your HSA to replace what you spent. You also can schedule an online payment using a mobile app or online banking.


1 All tax references are at the federal level. State taxes may vary. The information above is not intended and should not be construed as legal, tax or investment advice. For such advice, including advice on how this information applies to your individual circumstances, please contact your attorney, tax advisor or other appropriate professional.

Deposit and lending services are offered by Thrivent Federal Credit Union, a member-owned not-for-profit financial cooperative that is federally insured by the National Credit Union Administration and doing business in accordance with the Federal Fair Lending Laws. Insurance, securities, investment advisory and trust and investment management accounts and services offered by Thrivent Financial, the marketing name for Thrivent Financial for Lutherans, or its affiliates are not deposits or obligations of Thrivent Federal Credit Union, are not guaranteed by Thrivent Federal Credit Union or any bank, are not insured by the NCUA, FDIC or any other federal government agency, and involve investment risk, including possible loss of the principal amount invested. Must qualify for membership with Thrivent Federal Credit Union.