HSA tax advantages
Health Savings Accounts offer a triple-tax advantage* – deposits are tax-deductible, growth is tax-deferred, and spending is tax-free.
All contributions to your HSA are tax-deducible, or if made through payroll deductions, are pre-tax which lowers your overall taxable income.
- Your contributions may be 100 percent tax-deductible, meaning contributions can be deducted from your gross income.
- All interest earned in your HSA is 100 percent tax-deferred, meaning the funds grow without being subject to taxes unless they are used for non-eligible medical expenses.
- Withdrawals from your HSA are 100 percent tax-free for eligible medical expenses (i.e., deductibles, copays, prescriptions, vision, and dental care).
- Your HSA funds are not taxed as long as you use them for eligible medical expenses.
Your HSA contributions
Each year the IRS sets limits on how much you can contribute to your HSA with a single plan and family plan. To ensure you receive the full tax-advantage, it’s important to stay within the annual contribution limit.
- If you have a High Deductible Health Plan (HDHP) through your employer, you can choose to contribute pre-tax dollars directly from each paycheck.
- If this is not available through your employer, you can choose to make post-tax contributions and claim a tax-deduction on your tax return. Again, it’s important to keep in mind the annual contribution limits determined by the IRS to ensure you receive the full tax benefit.