What does a health savings account (HSA) allow?

A health savings account (HSA) is designed to provide individuals with a tax-advantaged way to save and pay for qualified medical expenses. The key feature of an HSA is that it allows for tax-free contributions, tax-free growth of the funds, and tax-free withdrawals when the money is used for qualified medical expenses. This means that any income earned on the funds within the HSA is not subject to taxes, making it a powerful tool for managing health-related costs.

The ability to withdraw funds tax-free for eligible medical expenses underscores the utility of the HSA in promoting health and wellness while simultaneously providing tax benefits. This characteristic is especially advantageous for those who want to budget for healthcare costs while minimizing their tax liabilities.