How an HSA Saves You Money in Taxes in Daniel Stewart

Here’s one of the most common questions people ask about having a health savings account (HSA):

Is an HSA tax-deductible?

An HSA is a tax-advantaged savings account that can help you cover qualifying medical expenses. But it’s more than a simple place to store your money. It saves you money in taxes in three different ways.

HSA Contributions

The first way you can save money is through your contributions. The IRS limits how much money you can put into an HSA during the year. For 2022, that’s $3,650 for individuals and $7,300 for families. Those over 55 can add a “catch-up” contribution of $1,000.

That money you put into your HSA is not subject to federal income tax. Is an HSA tax-deductible? Absolutely! You can claim deductions on your contributions even if you don’t itemize your deductions on your Schedule A.

HSA Investments

Another way to save is through HSA investments. Investing the money in your HSA is optional. But many providers offer this service for a relatively modest fee.

With investments, you can grow your wealth and watch your savings increase over time. The interest your account earns is tax-advantaged, too! So, those savings can balloon without having to worry about gains tax.

HSA Payments

Finally, you can save money in your taxes through HSA payments.

An HSA will cover qualifying medical expenses. The list of expenditures is vast and determined by the IRS. It includes everything from life-saving surgery to over-the-counter cold products.

The expenses you cover with your HSA are all tax-advantaged. You pay for those health-related costs without being subject to income tax on the money.

The funds from your HSA are taxed if you use them on non-qualifying expenses. So it’s essential to familiarize yourself with what’s eligible and what’s not. Having that knowledge will help you avoid unwanted tax situations.

Opening an HSA

If you don’t have an HSA, you’re missing out! There are strict rules to having these accounts, and you can only open one if you meet specific criteria. But if you check off all the boxes, it can be a great way to diversify your portfolio and prepare for unexpected health costs.

Author Resource:-

Daniel Stewart has been helping people with their money management and personal finance with over 15 years’ experience in business finance. You can find his thoughts at savings guide blog.