You need to sign up for a Health Savings Account (HSA).  Most of you can stop reading here unless your employer or you (for those going indie on their insurance) have some sort of High Deductible Health Plan (HDHP).  An HDHP is defined by the IRS as having a “higher annual deductible than most insurance plans” and include a “maximum limit on the sum of annual deductible…blah blah blah.  Basically, it is whatever the IRS decides it is for any given year.  The good news is that your health insurance provider will make it very clear to you if your plan is or is not an HDHP.  Once you have an HDHP, you can set-up your HSA account.

Any money you place into your HSA will qualify you for a tax refund on that amount of money up to the annual deductible on your insurance.  So, if your deductible is 3k/year, then all the contributions you place in your HSA up until your 3,001st dollar will get you a tax refund come April.  Unfortunately, if you try and withdraw any of that money prior to your retirement for a non-medical related expense, you’ll be liable for the taxes + an additional 10% penalty.

How does the IRS know, you ask?  Well, when they audit you they’ll ask you to produce the receipts of your claimed HSA medical expenses.  So, the chances of you actually having to caugh up the taxes and the penalty on an unauthorized purchase is rather slim…but who really enjoys an audit?

Your HSA will be just like any other bank account.  It’ll have a debit card and checks and statements and…you get the idea.   Watch out for the fees though.  Lots of fee-loving banks (ahem, Chase) will charge you monthly fees, check fees, minimum balance fees, maximum withdrawal fees…just about every fee they can until you no longer have any money in your HSA.

In my opinion, the best bank out there for an HSA in terms of having no-fees and high interest is Delta Trust.  http://www.delta-trust.com/

Scan your application along with your photo ID and send it over to Jaime.  She’ll have you set up in a couple of days.

Once you’ve got some money in the bank and the debit card in your hand, you’re good to go.  Get that double-cheeseburger at Wendy’s, if you don’t mind the IRS audit.  There are no blocks on where you can use your card.  Afterwards, you can stop at CVS and pick up a bottle of Pepto to wash it down — It’ll be a little extra tasty knowing it came from tax-free earnings.