HSA (Health Savings Account)
A triple-tax-advantaged savings account for medical expenses, available with high-deductible health plans. Contributions are tax-deductible, growth is tax-free, and qualified withdrawals are tax-free.
A Health Savings Account (HSA) is a tax-advantaged account available to individuals enrolled in a High-Deductible Health Plan (HDHP). For 2025, contribution limits are $4,300 for self-only coverage and $8,550 for family coverage, with an additional $1,000 catch-up for those 55 and older.
The HSA offers a unique triple tax benefit: contributions are tax-deductible (or pre-tax if made through payroll), investments grow tax-free, and withdrawals for qualified medical expenses are tax-free. No other account in the tax code offers all three benefits simultaneously.
Many financial planners recommend using the HSA as a long-term investment vehicle. You can pay current medical expenses out of pocket, let your HSA balance grow and invest for years, then reimburse yourself for those expenses at any time in the future. After age 65, HSA funds can be withdrawn for any purpose — non-medical withdrawals are simply taxed as ordinary income (like a Traditional IRA), with no penalty.
Related Terms
FSA (Flexible Spending Account)
An employer-sponsored account that lets you set aside pre-tax dollars for medical expenses or dependent care. Unlike HSAs, FSAs generally have a use-it-or-lose-it rule.
Above-the-Line Deduction
Deductions subtracted from gross income to arrive at AGI, available regardless of whether you itemize. Examples include IRA contributions, student loan interest, and HSA contributions.
Medical Expense Deduction
An itemized deduction for unreimbursed medical and dental expenses that exceed 7.5% of your AGI. Qualifying expenses include doctor visits, prescriptions, insurance premiums, and more.
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