The money that moves through your Health Savings Account is tax free
Tax-free deposits. The money you contribute to your HSA isn’t taxed. Whether or not you itemize deductions on your income tax return, your HSA contributions are deductible. You can keep contributing for the current tax year until the tax deadline, generally April 15 of the following year— up to the IRS annual limit—to maximize your tax savings.
Tax-free withdrawals. The money you withdraw— today or in the future—isn’t taxed, as long as you use it to pay for eligible medical expenses. That’s different from a 401(k) or similar retirement plans, which are taxed when you withdraw funds.
Tax-free earnings. Your interest and any investment earnings grow tax-free.
If you saved $3,600 per year, compounded at a 5% rate of return, after 30 years, you could potentially have $256,865 tax-free dollars to use when you need it. For example, to pay for qualified medical expenses, Medicare premiums, or to supplement your retirement income.
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