An HSA, also know as a Health Savings Account, is a vehicle for saving money towards future medical expenses. There are various criteria for setting up an account like this, but the money can be used to pay for future eligible health care expenses for you and your dependents.
Once the account is setup, it is yours to keep and the money not used can be rolled over to future tax years. Even if you change jobs or retire, you can keep your account.
Money to the HSA can be contributed by you, by your employer and by family and friends, but you then decide when you would like to use the money in this account. Also, you do not lose the money if you don’t use it in the tax year you contributed.
The reason for putting money into an account like this is because you get tax-free deposits into the account, you get tax-free earnings and appreciation and you get tax-free withdrawals when paying for eligible health care expenses. Therefore the benefits include reducing your taxable income in each tax year that you contribute.
If part of your divorce decree or separation agreement, the transfer of your HSA to your spouse is not considered a taxable transfer. After the transfer, the former spouse is treated as the HSA account holder (if this transaction is approved by the financial institution holding your account). You or your former spouse must request the transfer to the spouse’s name and perform other actions required by financial institution or the law.
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