A health savings account (HSA) is a tax-favored savings account created for the purpose of paying medical expenses.
Contributions to the HSA are 100% deductible (up to the legal limit) — just like an IRA.
Withdrawals to pay qualified medical expenses are never taxed.
Interest earnings accumulate tax-deferred, and if used to pay qualified medical expenses, are tax-free.
- HSA money is yours to keep
Unlike a flexible spending account (FSA), unused money in your HSA isn’t forfeited at the end of the year;
it continues to grow, tax-deferred.