Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Health Savings Accounts (HSA)

Types of Tax-Favored Arrangements

HSA Benefits

The benefits of having an HSA include:

  • Amounts contributed to an HSA, except for employer contributions, can be used as an adjustment to income.
  • 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 and are carried over, without limit, from year to year until the taxpayer uses them.
  • The interest and other earnings on the assets in the account are tax-free.
  • Distributions will 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.
  • There is no deadline by which qualifying expenses must be reimbursed by the HSA.