How HSAs Can Benefit Single Parents
As a single parent, you face a unique set of challenges. You are your children’s sole provider for care and must face the burden of medical costs and hard decisions alone. This can bring a new level of stress and added responsibilities, all with a single income.
Fortunately, a Health Savings Account (HSA) can help single parents like you. HSAs have key benefits that you can take advantage of to help you plan for future medical costs and relieve some of your stress.
Understanding HSAs
In 2022, almost 90 percent of eligible employees possessed an HSA.1 If you don’t know what an HSA is, it’s a special savings account that helps you save money on tax-qualified health care expenses. This is money set aside by you pre-tax for eligible expenses you already incur daily for yourself and your children.
You might be surprised by the range of eligible everyday health items which may include: over-the-counter medications, prescriptions, diaper rash creams, bandages, thermometers, sanitizing wipes, and even some vitamins. Learn more about HSA-eligible items >
To qualify for an HSA, you must be enrolled in a qualified High Deductible Health Plan (HDHP). Your HSA provider may also give you a debit card for easy access to funds.
Boosting Your Take-Home Pay
Single parents can be stretched thin when it comes to income. An HSA may help boost your take-home pay by reducing your taxable income.
With an HSA, money goes in tax-free, savings may grow tax-free, and withdrawals are tax-free when used for eligible items. Because you pay with pre-tax dollars, the money you put in your HSA could go further in paying for your family’s health care.
You can make contributions (up to the annual maximum) to your HSA on a pre-tax basis through your payroll deductions. Depending on your tax rate and how much you contribute, you may save 10%-30% in taxes.3
Building an Emergency Medical Fund
A notable feature of an HSA is that it has no minimum balance. You can open your account and start contributing to build your emergency medical fund right away. Regular contributions may help your HSA grow year after year. Having this money set aside may help provide a cushion for emergency medical expenses.
Another HSA benefit is that your funds are not subject to “use or lose” rules, like a Flexible Spending Account (FSA). You don’t have to spend all the funds by a certain time limit, and the remaining HSA funds carry over year after year.
Covering Your Children’s Medical Costs
If you claim children on your taxes, you can use your pre-tax HSA money for their eligible medical expenses even if you have a qualified individual high deductible health plan (HDHP) and contribute the individual HSA limit. With family coverage in a qualified HDHP, the HSA family contribution limit is higher than the individual contribution limit.
Consider specific eligible expenses you may regularly pay out of pocket for children, such as baby diaper rash creams, pain relief medications, and nursing supplies (e.g., breast pumps, and lactation supplies). You can expense these through your HSA.
Supporting Mental Health
HSAs are not just for physical health expenses; they may also be used to support your mental well-being. Research indicates that single mothers are at a higher risk for mental health challenges, including anxiety and depression.2 While many health insurance plans cover therapy, finding the right in-network provider can be difficult, and out-of-pocket costs can accumulate rapidly.
The good news is that some mental health therapy, including virtual sessions, qualifies as an HSA-eligible expense. If your HSA balance allows, you can use your funds to cover the cost of these important sessions. Other therapy options include psychologist visits, psychiatric care, alcoholism treatment, and more. Additionally, some over-the-counter products related to mental health are also eligible for reimbursement through your HSA.
Learn more about IRS-approved mental health costs >
In summary, an HSA may benefit single parents, helping you manage medical expenses, save for emergencies, and support your physical and mental health. By taking advantage of an HSA, you can work toward a healthier financial future for you and your children.
Visit our HSA FAQ page for more information about HSAs.
This blog is up to date as of November 2024 and has not been updated for changes in the law, administration or current events.
