A new year is here, and you may be wondering what you can do to improve your budget in the coming months. One option to consider is a health savings account, or HSA. An HSA is a type of tax-advantaged savings account that allows you to prepare for medical expenses while reducing the total amount of your taxable income. Continue reading to discover the answers to some common questions about HSAs. How does a health savings account work? After you open an HSA, you will be able to deposit funds into it, which will then be tax-deductible. The funds that you deposit will earn interest, which you won’t have to pay taxes on. You can use the funds in your HSA to pay for medical expenses, including prescriptions, dental work, doctor visits, and many other types of medical costs. You won’t have to worry about the funds in your HSA ever expiring. How can I open an HSA? Consult a certified public accountant (CPA) for assistance in opening an HSA. They will be able to review the guidelines with you and determine if you are eligible to open a health savings account. To open an HSA, you have to be enrolled in an eligible health plan. In addition, no other person can claim you as a dependent when they file their taxes. How can I maximize my savings with a health savings account? The best way to maximize your savings with an HSA is to contribute the maximum amount each year. In 2020, the maximum contribution for individual HSA accounts is $3,550, while the max contribution for family accounts is $7,100. If you are 55 or older, you can contribute an additional $1,000 each year. You should also consult a CPA about the best way to invest your HSA funds to meet your savings goals. Are you in need of investment assistance in Steamboat Springs, CO? Get in touch with THPK Certified Public Accountants. Their team of CPAs can help you open an HSA and invest the funds wisely. For more information, call (970) 879-1787.