With a few months left in the year, there is still time to minimize your tax burden and potentially increase your refund when you file your taxes next year. An easy way to do this is by harnessing the advantages of your workplace Health Savings Account (HSA).
An HSA is a tax-advantaged medical savings account, available to U.S. taxpayers enrolled in a high-deductible health plan, typically offered through your workplace. Contributions to an HSA are not subject to federal income tax and can accumulate and roll over to the next year if they are not fully spent. Funds are used to pay for qualified medical expenses at any time without taxes or penalties.
One advantage of your HSA is that contributions are deducted from your gross income before taxes, resulting in a reduction of your taxable income and tax liability.
The most widely understood benefit of this type of account is that withdrawals are tax-free, provided they are used for qualified medical expenses. Such expenses can include copays for doctor visits, prescription or over-the-counter medications, dental and vision care, mental health care and more.
The funds in your HSA can even be invested. Any interest, capital gains, or dividends on the investments grow tax-free, which can increase the value of your account over time.
For tax year 2023, the HSA contribution limits are $3,850.00 for individual coverage and $7,750.00 for family coverage. Maximizing your Health Savings Account is more than shielding your finances from taxes, it’s about proactively managing your healthcare expenses and investing in your health and financial future.