There are several benefits from having an HSA. Some benefits of an HSA include the following:
- The taxpayer can claim a tax deduction for contributions made by the taxpayer or someone other than an employer, even if the taxpayer does not itemize deductions on Form 1040.
- Contributions to an HSA by an employer may be excluded from gross income; this includes contributions made through a Section 125 cafeteria plan.
- The contributions remain in the account from year to year until the taxpayer uses them.
- The interest and other earnings on the assets in the account are tax-free.
- Distributions may be tax-free if used to pay unreimbursed qualified medical expenses.
- An HSA is portable so it stays with taxpayers even if they change employers or leave the work force.