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If an HSA were an athlete, it would be considered a triple threat option
We've written about Health Savings Accounts (HSAs) in the past (read: Hooray for HSAs), but it is a good subject to revisit since these accounts have numerous tax benefits. Not to mention, they are a valuable tool to help offset rising medical costs.
Often, tax-efficient strategies consist of either lowering a tax bill or deferring taxes to a later period. Tax avoidance is typically a red flag.
HSAs are a different animal. They come with triple tax benefits.
Contributions can be used with pre-tax dollars which lowers your taxable income
Appreciation and income from invested funds grow tax-free
Funds used for qualified medical expenses are not taxed when withdrawn
There you have it. Beneficial tax treatments for three stages of saving and spending on qualified medical expenses.
In order to utilize an HSA, you (or your spouse) must be enrolled in a high-deductible insurance plan.
See our recent post about 2024 contribution limits.
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