A Health Savings Account (HSA) is a type of personal savings account that you can set up to pay certain health care costs. It is a tax-advantaged account that can be used to pay for qualified medical expenses, including copays, prescriptions, dental care, contacts and eyeglasses, bandages, X-rays, and a lot more. Heres how it works:

• Eligibility: You are eligible to contribute to an HSA when you are covered by an HSA-eligible plan, which is sometimes called a High Deductible Health Plan (HDHP). With HSA-eligible plans, the monthly premium is usually lower, but you pay more out-of-pocket health care costs yourself before your insurance company starts to pay its share.

• Contributions: You can make pre-tax contributions to an HSA, allowing you to pay for qualified medical expenses tax-free. Contributions can be made by the individual who owns the account or by an employer, or by anyone else who wants to contribute on behalf of the account owner. When people contribute their own funds to an HSA, they don’t have to pay income tax on those funds.

• Withdrawals: You can withdraw money from your HSA tax-free as long as you use it for qualified medical expenses, like deductibles, copayments, coinsurance, and some other expenses. If you withdraw money for non-qualified expenses, you will have to pay taxes on the amount withdrawn, plus a 20% penalty if you are under age 65.

• Ownership: Your HSA belongs to you, not your employer. So when you change employers or retire, you can keep your HSA.

• Investment: HSA funds can be invested over time and can grow with interest or investment returns, depending on the type of account you set up.

• Limits: There are limits on how much you can contribute to an HSA each year, and these limits change annually. For example, in 2023, the HSA contribution limits per year are $3,850 for self-only coverage and $7,750 for family coverage.

In summary, an HSA is a tax-advantaged account that can help you save money on qualified medical expenses. It works together with an HSA-eligible health plan, and you can make pre-tax contributions to the account. You can withdraw money tax-free as long as you use it for qualified medical expenses, and your HSA belongs to you, not your employer.