Are you tired of watching your health care costs continually rise? Perhaps a new tool, a Health Savings Account (HSA), will help you and other consumers take greater control in the efforts to turn rising costs back. Like Individual Retirement Accounts (IRAs), HSAs allow taxpayers to save their hard-earned dollars in tax-deferred accounts and use them specifically to pay unreimbursed medical bills. The great news is that most taxpayers are eligible for HSAs, despite needing to meet certain criteria. More good news is that individuals own their individual accounts and do not lose their savings if they change employers, retire, or become unemployed.

-- An HSA works like an IRA, but tax-free withdrawals, before age 65, are exclusively for medical expenses.

-- HSA owners must carry a high-deductible medical insurance policy.

-- 100% or more of the insurance deductible amount can be contributed to the HSA .

-- Like IRAs, funds saved in HSAs are 100% tax-deferred until distribution.

-- Funds are solely for paying qualified medical expenses for the account holder, his or her spouse, and dependents, but only to the extent that expenses are not paid for through any other means.

-- HSAs are for use in paying smaller covered medical expenses until deductibles are met.

-- Taxpayers are eligible for HSAs even if they were eligible for, and had the option to elect, other insurance coverage or carry "permitted" insurance for treatment of a specific disease.

-- Taxpayers who are eligible for Veterans Administration (VA) benefits, but have not used them in the preceding three months may use an HSA.

-- For 2006 taxpayers may contribute the lesser of the annual deductible for medical insurance coverage, or up to $2,600 for singles, or $5,150 for families. There is an additional catch up provision of $500 for taxpayers age 55 or older in 2004. This catch up provision gradually goes up in subsequent tax years to $600 in 2005, $700 in 2006, $800 for 2007, $900 for 2008, and $1,000 for 2009 and thereafter.

-- For 2007 the maximum that may be contributed for a family plan is $5,650 and $2,850 for a single plan.

-- The year the plan begins, the maximum contribution may be made regardless of what part of the year the account is opened.

-- Funds kept in an HSA that are unused at the end of the year roll into the next year. Therefore account holders will not lose funds at year-end.

-- HSAs cannot be mingled with IRAs.

-- Both employers and individuals may contribute to HSA plans (and they can be part of a cafeteria plan) up to the maximum allowable amount in the same year.

-- Similar to the IRA’s, contributions may be made annually up until the taxpayer’s federal income tax filing deadline (generally April 15).

-- At age 65, taxpayers can choose to use any funds remaining in an HSA like a retirement plan, or continue to use funds for medical expenses. It is the account holders’ choice.

-- Because HSA contributions lower gross income, taxpayers could potentially fall into a lower tax bracket.

-- Penalties apply for use of funds to pay expenses other than qualified medical expenses, except for taxpayers or dependents that become disabled or have reached retirement age as defined by the Social Security Act.