Tax Income

Maximize your contributions to your HSA each year to take full advantage of tax-free growth and withdrawals for qualified medical expenses. For 2023, the contribution limit is $3,850 for individuals and $7,750 for families, with an additional $1,000 catch-up contribution for those aged 55 and older.

Ensure that withdrawals are only used for IRS-approved qualified medical expenses to avoid penalties and taxes. Qualified expenses include doctor visits, prescriptions, dental care, vision care, and more.

Save all receipts and documentation for qualified medical expenses to substantiate your HSA withdrawals in case of an IRS audit. This minimizes the risk of penalties or tax liabilities.

Pay for medical expenses out of pocket and allow your HSA funds to grow tax-free. You can reimburse yourself later for qualified expenses, as long as you keep receipts and records.

Many HSA accounts offer investment options. Invest your HSA funds to grow your account balance over time, maximizing the tax-free growth potential for future medical expenses.

Allow your HSA funds to grow without making unnecessary withdrawals. The longer your funds remain invested, the more you can benefit from compounding interest and tax-free growth.

After age 65, HSA funds can be used for non-medical expenses without penalties (though withdrawals for non-medical expenses will be taxed as income). This makes HSAs a versatile tool for retirement planning.

Monitor your contributions to ensure you don't exceed the annual limit. Over-contributions may result in penalties and taxes unless corrected promptly.

Check if your employer offers HSA contributions as part of your benefits package. Employer contributions count toward your annual limit and can reduce your out-of-pocket investment.

While HSAs offer federal tax benefits, some states do not follow federal HSA tax rules. Research your state’s regulations to ensure you maximize your tax savings.