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What are Health Savings Accounts, or HSAs?

An HSA, or Health Savings Account, is a tax-advantaged account that can be used to save for qualified medical expenses. HSAs are available to anyone with a high-deductible health plan (HDHP).

The main benefit of an HSA is that contributions are tax-deductible, meaning you can deduct them from your taxable income. This can lower your tax bill and give you more money to save for upcoming medical expenses.

Another benefit of an HSA is that earnings grow tax-free. This means that the money you contribute to your HSA will continue to grow, tax-free until you withdraw it.

Finally, withdrawals from an HSA are tax-free as long as they are used for qualified medical expenses. This means that you can use your HSA to pay for things like doctor's visits, prescription drugs, and hospital stays, and you won't have to pay taxes on the money you withdraw.

If you have a high-deductible health insurance plan, an HSA is a great way to save for medical expenses. The tax advantages can make it a very powerful savings tool.

Here are some additional things to keep in mind about HSAs:

  • You can only contribute to an HSA if you have a high-deductible health plan.

  • The contribution limit for HSAs is $3,650 for individuals and $7,300 for families in 2023, and, like the limits on contributions to other account types, those limits change every year.

  • You can carry over any unused funds from year to year.

  • You can invest the money in your HSA, which can help your money grow even faster.

  • If you don't use all of the money in your HSA, you can withdraw it for any purpose at any time, but you will have to pay taxes on the earnings.

Overall, HSAs are a great way to save for upcoming medical expenses. If you have a high-deductible health plan, you should definitely consider opening an HSA.
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