Understanding Health Savings Account (HSA) and Its Purpose

Health Savings Account (HSA) is a type of savings account that allows individuals to save money tax-free for qualified medical expenses. The goal of creating HSAs is to provide a way for individuals to save for healthcare costs while also enjoying tax benefits.

HSAs are designed to help individuals take control of their healthcare expenses and save for future medical needs. By contributing to an HSA, individuals can reduce their taxable income while building a fund specifically designated for medical expenses.

Here are some key points to know about Health Savings Accounts:

• Individuals must be covered by a High Deductible Health Plan (HDHP) to be eligible for an HSA
• Contributions to an HSA are tax-deductible, reducing the individual's taxable income
• Funds in an HSA can be invested and grow tax-free
• Withdrawals from an HSA for qualified medical expenses are tax-free
• Unused funds in an HSA roll over year after year, unlike Flexible Spending Accounts (FSAs)

Health Savings Account (HSA) is a tax-advantaged savings account that empowers individuals to save for medical expenses while reducing their taxable income. This financial tool was established to encourage people to plan ahead for healthcare costs, thus alleviating some of the anxiety often associated with medical bills.