The Background on HSA
A health savings account (HSA) is a tax-favored medical savings account available to taxpayers. HSAs enable taxpayers to pay for current medical expenses and save for future qualified medical expenses on a tax-free basis.
HSAs are owned by individuals, but contributions may be made by an employer or any other person. Amounts in an HSA may be accumulated over the years or distributed on a tax-free basis to pay for or reimburse qualified medical expenses.
Contributions are amounts added to an HSA account by an individual, an employer, or any other person.
Deductions are the amounts allowed as adjustments to income on Form 1040.
Distributions are amounts an individual withdraws from the HSA for qualified medical purposes.