If you have a high-deductible health plan (HDHP), you might also want to have a health savings account (HSA). This is an investment account that grows tax-free over the years. You put money in the account before you have to pay any taxes on it, so you save money. You don’t pay a tax when you spend it either, as long as you spend it on qualified health expenses — health care or products on an IRS-approved list.
HSAs must be paired with an HDHP, which means you must pay a large amount of your health care costs before your insurance pays anything.
What You Can Use the Savings For
- Hospital costs
- Prescription drugs