How are contributions to an HSA taxed?
If contributions are made as part of an annual health benefits election and submitted as part of the employee’s payroll deduction, then those contributions may be included in their income. Other contributions made to the HSA can be deducted from their income when they file their annual federal income tax return, even if they do not itemize deductions. What happens to any remaining money in an HSA at the end of the year? At the end of the year, any money remaining carries over to the next year. Does the money in the HSA earn interest? Yes; an HSA can grow over time. Interest earned on an HSA is not included in the employees’ income for federal tax purposes. There is no minimum balance required to earn interest. In addition, once their HSA balance reaches $2,000, they may have the HSA investment service available to you. BILL BERENSON is vice president of sales and service for Aetna’s North Central Region. Reach him at (312) 928-3323 or berensonw@aetna.com.
