A health savings account, or HSA, is a triple-tax advantaged savings account that you are eligible to contribute to if you are covered by a health insurance plan that qualifies as an HSA-eligible health plan within the IRS’s guidelines. Triple-tax advantaged? This is a phrase you may not encounter often in your daily life but that is often associated with HSAs because they are a unique type of savings account.
What exactly does triple-tax advantaged mean?
- First, you can contribute to an HSA directly from payroll as a pre-tax contribution (avoiding FICA, Medicare, State*, and Federal Income tax).
- Any interest or growth your money receives within the account is tax-free as well*.
- Finally, you can take money out of this account to pay for qualified medical expenses (QME) without being taxed. See this link for a list of what the IRS considers a QME.
If that is confusing, just know that a health savings account is the most tax advantaged account in the U.S. tax code, more tax advantaged than your 401K! How can you set up one of these accounts? First, you need to be covered by what the IRS considers to be an HSA-eligible health insurance plan (often a high-deductible health plan). Once you are signed up for an HSA-eligible health plan you can begin to look at your options for opening an HSA.
Often, your employer will have an HSA provider already chosen that you can sign up with and easily take advantage of your payroll tax breaks (see tax savings #1 above). However, if your employer does not have a relationship with an HSA provider, or if you get health insurance through the open market, or if you just don’t like the HSA provider your employer is using, you can choose the HSA provider that works best for you! That is where we want to help. Since 2008, HSA Search has been helping consumers compare health savings account (HSA) providers across the country to help them find the best HSA provider for their health savings goals. 13 years later, our mission is no different. Before choosing a provider one of the most important things to know is that not all providers are the same! We make choosing an HSA provider easy by allowing consumers to find providers that offer the features that they care about most such as: online banking, interest rates, debit cards, and investment options. For some providers, you can even jump over to their website to open an account with them online from their HSA Search page! As we look to build out this blog, we plan on providing more helpful information such as: HSA provider interviews, HSA usage strategies, and HSA industry insights. So, stay tuned as we look to help you find the right HSA provider for you!
*State tax savings may not be available in every state. Please consult with a tax professional to learn more about how an HSA may affect your taxes.