Understanding Health Care Savings Accounts

A health savings account (HSA) is a savings account that lets people set aside money on a pre-tax basis to pay for qualified medical expenses. An HSA is complementary to a health care plan that has a high deductible. People can save money in an HSA before taxes and use the funds to pay for eligible health care expenses, including expenses the health plan does not cover. For example, people can use their HSA savings to cover health care costs until reaching the plan's deductible.

People can use their HSA funds to pay the copayment until reaching the out-of-pocket limit. Taxes do not apply to the money put into an HSA. Patients can invest a portion of the money in an HSA if maintaining a balance of $1,000 or more. For this reason, many people use part of their HSA to save for retirement.

“A health savings account (HSA) is a savings account that lets people set aside money on a pre-tax basis to pay for qualified medical expenses.”

Pros and Cons of an HSA

According to Investopedia, there are several advantages to an HSA. For one thing, it covers a wide variety of expenses, including dental, medical, and mental health services. Contributions can also come from multiple people, including the enrollee, their employer, a relative, or anyone else who wants to contribute. Most commonly, however, contributions are made with pre-tax funds through an employer. Contributions that are made with after-tax dollars can also be deducted from one's gross income.

Of course, HSAs come with their own set of disadvantages as well. For instance, they are only available to people covered under an HDHP, which can be more financially burdensome than other types of health insurance. They may also place enrollees under pressure to save instead of using the money. Furthermore, using HSA funds for non-qualified funds before turning 65 will result in an income tax as well as a 20% penalty. Enrollees must also keep receipts to prove that their withdrawals were healthcare-related in case of an audit.

“Contributions that are made with after-tax dollars can also be deducted from one’s gross income.”

Financial Benefits of an HSA

An HSA not only helps save on health care expenses but comes with tax advantages. One advantage is that people do not have to pay taxes on contributions to their HSA. If a person adds money to their HSA through their employer, the funds are taken before taxes, lowering taxable income. People who add money to their accounts personally will have deductions from their gross income when filing income taxes at the end of the year.

Anything earned on the investment of funds also remains tax-free. If using the withdrawals to pay for qualified medical expenses, no taxes and penalty fees apply. Funds withdrawn for medical expenses are not taxed. At age 65, HSA funds are available for use without penalty. After this age, people can use their HSA savings as retirement money and withdraw funds from an HSA without incurring tax penalties, even if used for non-medical expenses. However, the money would still be subject to income tax.

“An HSA not only helps save on health care expenses but comes with tax advantages.”

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HSAs and Dental Services

While HSAs do not typically cover cosmetic dental services, they do cover routine procedures, such as checkups and cleanings. HSAs also tend to cover any dental procedures deemed medically necessary, including various preventative and diagnostic procedures. Common examples include bonding, crowns, dentures, extractions, fillings, and root canals.

However, patients may need to pay a copay, even with an HSA on their side. As such, it is best practice for enrollees to contact their employer and insurer with any questions or concerns they may have about their plan.

“While HSAs do not typically cover cosmetic dental services, they do cover routine procedures, such as checkups and cleanings.”

Questions Answered on This Page

Q. What is a health savings account?

Q. What are the tax benefits to having an HSA?

Q. What are some of the pros and cons of an HSA?

Q. Do HSAs cover dental services?

Q. What treatments are covered by an HSA?

People Also Ask

Q. Is dental insurance worth it?

Q. Who is the billing specialist?

Q. Why is preventative care important? How can it save you money?

Q. Why is it important to find the right general dentist?

Q. When is the right time to open an HSA?

Treatments Covered By an HSA

An HSA will typically cover any medical expenses an enrollee pays for themselves, their spouse, or their dependent(s). The IRS defines medical expenses as "the costs of diagnosis, cure, mitigation, treatment, or prevention of disease." Enrollees can usually only include the medical and dental expenses they paid in a plan year and not any future payments.

In general, enrollees can use Schedule A (Form 1040) to deduct the amount of medical and dental expenses that exceed 7.5% of their adjusted gross income (AGI). Enrollees commonly use their HSA funds on annual physical examinations, dental treatment, diagnostic devices, disabled dependent care expenses, and more.

“An HSA will typically cover any medical expenses an enrollee pays for themselves, their spouse, or their dependent(s).”

Frequently Asked Questions

Q. Can I use my HSA funds on non-medical-related expenses?

A. Yes. However, using your HSA funds on non-eligible expenses will require you to be taxed on said expenses, as the initial contributions went tax-free. You may also face a 20% tax penalty if you are under the age of 65.

Q. Can I have more than one HSA?

A. Yes. Though you cannot have an HSA in conjunction with an FSA or HRA, you can open as many HSA accounts as you want. However, annual IRS contribution limits may still apply.

Q. What is the monthly or annual fee for an HSA?

A. The monthly fee for an HSA tends to be less than $5 a month, or around $30 a year. However, many HSAs do not require monthly payments, and others may waive or reduce these fees if enrollees maintain a minimum balance.

Q. What is the difference between an FSA and an HSA?

A. FSA funds are available on a "use-it-or-lose-it" basis, while HSA funds carry over from year to year. HSA funds are also entirely in the enrollee's control, meaning they stay with the enrollee even when they change jobs or move to a different state.

Q. What happens to my HSA when I change health insurance policies?

A. Since your HSA funds are entirely yours, your HSA will remain unchanged even if you change your health insurance plan. However, you will only be eligible to make future contributions to your HSA if you choose a qualifying plan.

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By visiting us as soon as possible, our team can help get you the professional treatment you need. Instead of waiting around and allowing the symptoms to get worse, we can provide you with treatment options.

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Dental Terminology

Co-pay

A fixed payment made by the insured (patient) coupled with that of the insurance coverage.

Deductible

Part of an insurance policy that indicates a specified amount of money that the insured must pay prior to the coverage amount.

Health Care Savings Accounts

A tax-advantaged savings account for medical expenses for tax-payers with a high-deductible healthcare plan.

Health Plan

A type of insurance that covers all or part of medical and dental expenses when a person is ill or injured.

Medical Necessity

Health care services that are justified as necessary for the well-being of a patient.

Oral Health

Health conditions that directly relate to the functionality or aesthetics of the mouth, teeth, gums, jaw, or throat.

Out of Pocket Medical Expenses

An out of pocket medical expense is anything a person has to pay for medical reasons that is not covered by insurance. These typically include co-payments, deductibles or uninsured prescription and procedure costs.

Out of Pocket Maximum

The out of pocket maximum is the most an individual will have to pay for health care services in a plan year before your insurance provider covers all the cost.

Prevention

The act or practice of stopping something from arising or its progression.

Tax-Advantaged

An economic bonus that applies to certain types of investments or savings accounts that are tax-reduced, tax-deferred, or tax-free.

Call Us Today

HSA can help you lower the costs of dental treatment. Our team at Desert Dream Dentistry & Spa can help. Call us today at 760-565-0234 to learn more about our services or schedule an appointment.

Helpful Related Links

• American Dental Association (ADA). Glossary of Dental Clinical Terms. 2025
• American Academy of Cosmetic Dentistry® (AACD). Home Page. 2025
• WebMD. WebMD’s Oral Care Guide. 2025

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