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  Health savings accounts (HSAs) are tax-advantaged accounts that allow you to put aside money to pay for health expenses. An HSA is distinct from an FSA, which is a flexible spending account offered through your employer. An HSA is available only in conjunction with the purchase of a high-deductible health insurance plan, and there are several advantages and disadvantages to establishing one of these accounts.
  
  

Tax Savings

• The money you contribute to an HSA is tax-deductible--meaning you subtract it from your income before calculating the tax you owe--and it can be used to pay for any medical expenses you incur. Contributions can be made up to limits set by the IRS; the 2010 limit for individuals was $3,050, and the annual limit for family coverage was $6,150.
  
  

Savings Benefits

• The funds in an HSA roll over from year to year, which means that even if you don't use the money you deposited in one year, it's still available for future use. This money also can be invested in certain interest-bearing investments, depending on the laws of your state, and it grows tax-free. While you cannot take money out to pay for non-medical expenses without incurring taxes, this gives you another option for tax-deferred savings, and regular contributions can help you develop a large savings account.
  
  

Higher Out-of-Pocket Expenses

• The major disadvantage of an HSA is that it requires the purchase of a high-deductible health plan, which typically have lower premiums than standard health plans but require higher out-of-pocket expenses before the insurance coverage begins. In 2009, a minimum deductible of $1,200 was required for individual coverage, $2,400 for family coverage. If you do not have the money to pay this deductible, an HSA may not be right for you.