A Health savings account (HSA) is a tax favored savings account which may be opened when an individual enrolls in a high deductible health plan (HDHP). The combination of a HDHP and HSA gives most individuals and families more affordable health insurance coverage and a savings account that offers significant tax advantages.

Any money deposited in a qualified HSA will result in a tax deduction. This deduction is an "above the line" deduction which means you get a 100% write-off against your adjusted gross income. The money you deposit in a Health savings account earns tax deferred interest. For an individual in 2009, the maximum contribution is $3000 and for a family, $5800. The money you spend from your health savings account, if used for qualified medical expenses, is tax free.

Funds deposited in your Health savings Account may be used for any qualified medical expense, as defined by the IRS and remain tax-free. Dental costs, eye glasses and over the counter medications, are some of the items that can be paid for using the funds in your HSA.

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