Understanding Your Health Savings Account (HSA): 5 Best Ways to Leverage Tax-Free Savings
Contribute the Maximum Amount
Each year, aim to contribute the maximum allowed by the IRS to maximize tax savings. Contributions are tax-deductible, meaning they lower your taxable income
Invest Your HSA Funds
Many HSA providers allow you to invest your HSA funds in stocks, bonds, or mutual funds once you've accumulated a minimum balance.
Use for Qualified Medical Expenses
HSA funds can be used tax-free for a variety of qualified medical expenses, including doctor visits, prescription medications, and dental or vision care.
Save for Future Healthcare Costs
HSAs can be used to pay for healthcare expenses in retirement, such as Medicare premiums and long-term care insurance.
Let Your HSA Grow
Unlike Flexible Spending Accounts (FSAs), HSA funds roll over year to year. Allow your HSA to accumulate by covering small medical expenses out of pocket while letting your HSA funds grow tax-free.
Pay for Healthcare in Retirement
After age 65, you can use HSA funds to pay for any healthcare expenses without penalty. You can also withdraw funds for non-medical expenses
– Use for Family Members' Expenses
HSA funds can be used to cover qualified medical expenses for your spouse or dependents, even if they're not covered by your high-deductible health plan (HDHP), providing flexibility in managing family healthcare costs.
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Take Advantage of Triple Tax Benefits
HSAs offer three tax advantages: contributions are tax-deductible, investment growth is tax-free, and withdrawals for qualified medical expenses are tax-free.