What are the tax benefits of an HSA?
All HSA account earnings are not taxed. In addition, distributions to the account owner from the HSA will be tax free if the funds are used exclusively to pay for medical expenses. If the withdrawn money is not used for medical expenses, the distribution will be reflected as income. An additional 10% tax will also be owed if the account owner is younger than 65 or is not disabled. Generally, a deduction is able to be claimed by the account owner for the contribution amount. If the employer has made a contribution, it is generally excluded from the account owner’s income and not deductible.
