Does Tennessee Tax HSA Interest and Dividends or Gains?

When it comes to Health Savings Accounts (HSAs), many people wonder about tax implications, especially when it comes to interest, dividends, or gains on their HSA funds. In Tennessee, HSA interest and dividends are not subject to state income tax, making it an attractive option for residents looking to save for medical expenses.

However, it's essential to note that while Tennessee does not tax HSA interest and dividends, any gains from investments made using HSA funds may be subject to capital gains tax at the federal level. This means that if you earn profits from investing your HSA funds, you may need to report and pay taxes on those gains to the IRS.

When discussing Health Savings Accounts (HSAs) in Tennessee, one key question often arises: Are the interest and dividends from HSAs taxable? The good news for Tennessee residents is that the state does not impose any tax on HSA interest and dividends, allowing individuals to maximize their savings for future medical expenses without worrying about state tax deductions.