A little known method that can help you pay less in taxes and save more | HSA Approved Expenses for 2011

by RJ

in Insurance

AmbulanceI feel your pain. I to pay A LOT for health insurance. Yet, I haven’t gone to the doctor in two years.

I’m not saying this to brag about my health (Actually, with free preventative care, it’s pretty careless to not get a physical once a year). This behavior, of not using your health insurance, is fairly typical of people in their 20’s.

There is one advantage to being in this situation, besides the obvious — depending on your coverage; you may be eligible to open a Health Savings Account (aka HSA).

I’m amazed at how many taxpayers qualify to contribute to a Health Savings Account but don’t. There are many benefits for doing so.

The purpose of this post is to give a brief introduction to Health Savings Account, followed by a list of HSA allowable expenses in 2011

An Overview of Health Savings Accounts (HSAs)

A HSA is a unique savings account, used along with a high deductible health plan. A HSA is similar to a Traditional IRA. Contributions to a HSA are tax-deductible and withdrawals are tax-free, as long as the withdrawal is used for a HSA approved expenses.

To contribute to a HSA, you’re required to have a high deductible health plan.

Health Savings Account Contribution Limits

In 2011 the contribution limits, minimums, and maximums for opening an account are:


  • Minimum deductible to qualify = $1,200
  • Maximum out of pocket = $5,950
  • Contribution Limit = $3,050
  • Age 55 and over = $1,000


  • Minimum deductible to qualify = $2,400
  • Maximum out of pocket = $11,900
  • Contribution Limit = $6,150
  • Age 55 and over = $1,000

Benefits of Health Savings Accounts

What’s unique about HSAs, are that if contributions are not withdrawn, your money grows tax-deferred. Therefore, if you maintain good health and thus pay little medical expenses each year,  a HSA is another way to save for retirement because whatever money left in your account at age 65, can be withdrawn penalty free, similar to a Traditional IRA.

Even better, there are no income limits for HSAs. For those ineligible to contribute to am IRA due to income, they can still contribute to a HSA.

HSA Approved Expenses for 2011

Below are some examples of approved expenses for HSAs. I tried to pick out what was relevant for Gen Y. There are a lot more eligible expenses, which you can find in the link below:

  • Acupuncture
  • Alcoholism treatment
  • Ambulance services
  • Birth control pills
  • Chiropractor
  • Contact lenses
  • Crutches
  • Dental treatment
  • Eyeglasses
  • Eye surgery (including Lasik)
  • Fertility enhancement
  • Insulin
  • Lactation assistance supplies
  • Prescriptions
  • Therapy or counseling
  • Transplants
  • X-Rays

For a more complete list, click here.

HSA Resources

If you think of opening a HSA may be to your advantage, below are two resources to check out.

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Photo by: Gwire

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{ 10 comments… read them below or add one }

OrnellaNo Gravatar June 6, 2011 at 3:48 pm

Great post on HSA. If I may, I would like to mention that opening an HSA can be done through a bank such as Wells Fargo. I think HSA can be a wonderful tool to help you with your personal finance: tax-deductible and tax free withdrawals (on approved HSA expenses, of course).


RJNo Gravatar June 7, 2011 at 10:37 am

Thanks Ornella. I agree, HSAs are a huge boost. A lot of people spend the money anyways on healthcare, mine as well spend it tax-free.


JeffreyNo Gravatar June 7, 2011 at 12:25 pm

I think this will probably apply to me very soon (once I have to take care of my own healthcare), so I better get on top of it. I’m sort of like you, RJ: I don’t go to the doctor very much. That said, I can imagine I’ll choose a high-deductible health plan, if possible.


RJNo Gravatar June 9, 2011 at 1:56 pm

Thanks for the comment Jeffery. I’m guessing you took advantage of being on your parents plan, which you’re allowed to do until 26 now.


JeffreyNo Gravatar June 9, 2011 at 2:17 pm

I was for a while but I’ve most recently been on plans from my university, for which there aren’t many choices on coverage and deductibles and things like that.


RJNo Gravatar June 10, 2011 at 8:57 am

Most University’s have decent insurance. Although, usually the best part about it is the cost.


Paula @ AffordAnything.orgNo Gravatar June 7, 2011 at 8:08 pm

I have a high-deductible health plan and an HSA, and I definitely recommend it. Since I’m young and healthy, there’s no reason for me to go to the doctor except preventive care and emergencies, so there’s no reason for me to pay high premiums for a low deductible. It’s far better to take the high deductible and save in — what is essentially — a retirement account that you can tap anytime for health care costs.


RJNo Gravatar June 9, 2011 at 1:56 pm

Love the attitude Paula. Thanks for sharing your strategy.


Phil Fremont-Smith (@ImpulseSave)No Gravatar June 10, 2011 at 1:12 pm

This is such a great option – pre-tax retirement account you can tap for health care costs when you need it. Is this option well known? In the crowded personal-finance discussion online – I just don’t see this brought up very often. Seems a no-brainer for a lot of folks.



DanaNo Gravatar June 18, 2011 at 9:56 pm

I hope this program will be also available in my country so I can save some expenses.


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