TIENE or savings account is a health trust free of tax or custody account established exclusively to pay qualified medical expenses of the beneficiary’s account that for the period for which contributions are made aa HAVE, be covered under high deductible health plan (HDHP). This definition by section 223 of the Code of government revenues added to the act of improving and modernizing medicine health insurance 2003 January 1, 2004 effective.

What makes it so that means in plain English?

IS consists of two portions. The first is that IS itself is an investment account similar in structure to an IRA. The money in the account are invested compound that allows growth through investment earnings or interest and you never pay taxes on that interest.

If your employer offers that option have, their payroll deductions to the account are made on a basis of pre-tax profits fall means that the right account and you do not tax them. If you make any contributions on their own, you can deduct from your taxes on your tax return.

In 2009 the maximum contribution for employees with single coverage is $ 3,000, and for those with family coverage the maximum contribution is $ 5950. Just as IRA contributions, you have until April 15 next year to make your maximum contributions.

The second part of the health plan is MUST. You must make a high-deductible health plan (HDHP) designed specifically to be compatible and HAS to be under the age of 65 with no other medical coverage including health insurance. You can still qualify if you have dental, vision, long term care, disability, accident, workers ‘compensation, specified disease or illness plans that pay a fixed amount per day or period of hospitalization. A medical reimbursement plan for self-insured employer-sponsored could qualify as a HDHP.

In 2009, the minimum deductible health plan for employees with single coverage is $ 1,150, and for those with family coverage is $ 2,300.

The health plan must also resolve maximum cost expended. In 2009, the cost spent most of the health plan for employees with single coverage may be required to pay is $ 5800, and for those with family coverage is $ 11,600. Note that these amounts include the deductible.

So, how ARE you use and what costs you can pay with these funds?

When you have an eligible medical costs you can use the money you has to pay them. Above all this means that you pay any cost to resolve your deductible. There are also some medical costs not usually counted toward your deductible you can use the money for. This may include some drugs legal, insurance or COBRA insurance premiums for qualified long-term care if you are over the age of 65. Please note that you can not use their awards must pay insurance.

The list of eligible costs is too long to show here. You can find contoured in IRS publication 502 at http://www.irs.gov/publications/p502/ar02.html # en_US_publink100014783.

It is important that you understand they have is not a plan 125/Cafeteria section. If you do not use all their contributions from one year, you will not lose those funds. Remain in the account until you retire.

What if you need the cash for the costs non-medically qualified? If you are under 65 and withdraws the money from them for any expenses not approved, you will have to pay a penalty tax of 10% in the amount you withdrew and demanded the amount as income so you pay taxes on ordinary income. Once you turn 65, you have to pay no more than 10% penalty to withdraw funds for costs not yet approved but must pay taxes on ordinary income.

HSAs replace the high cost, low-deductible policies with health insurance have skyrocketed prizes. Offer prizes for the lowest health insurance, are a great investment vehicle, and provides good tax advantages. And if you are healthy and do not use all their savings, the funds can be used to supplement your retirement. HSAs is a very simple plan to which people will turn more and more.