Have coverage under an HSA-qualified “high deductible health plan” (HDHP).
	Have no other first-dollar medical coverage (other specific types of insurance like injury insurance or accident, disability, dental care, vision care, or long-term care insurance are permitted).
	Are not enrolled in Medicare.
	Cannot be claimed as a dependent on someone else’s tax return.

An HSA-qualified “high deductible health plan” (HDHP) is health insurance where you pay all expenses until they reach a high deductible amount. The rules require that the health insurance deductible be a least $1,050 for self-only coverage and $2,100 for family coverage (2006 amounts).

In addition, annual out-of-pocket expenses under the plan (including deductibles, co-pays, and co-insurance) cannot exceed $5,250 for self-only coverage or $10,500 for family coverage (2006 numbers).

You, your employer, or both, can make contributions to your HSA each year that you are eligible. You can contribute up to the amount of your HDHP deductible but no more than $2,700 for self-only coverage or $5,450 for family coverage. Individuals age 55 and older can also make additional “catch-up” contributions of $700 in 2006. An HSA is portable, meaning that it remains yours even if you change employers or leave the workforce. It can accumulate year-to-year if not used. If you make a contribution, you can deduct the contribution on your tax return whether or not you itemize deductions.

Distributions from your HSA are tax-free provided they are used to pay qualified medical expenses. If they are not used for qualified medical expenses, they are included in taxable income and are subject to an additional 10-percent penalty. Once you reach age 65, the 10-percent penalty no longer applies.