What is Health savings account (HSA)?
In short
A health savings account (HSA) is a tax-advantaged account for people covered by a high-deductible health plan. Contributions are deductible (or excluded if made by an employer), growth is tax-free and withdrawals for qualified medical expenses are tax-free.
Key takeaways
- Unused balances carry over and the account belongs to the individual.
- Withdrawals not used for medical expenses are taxable and, before 65, subject to a 20% additional tax.
- Contribution limits are set annually and indexed for inflation.
Where it's tested
TCP: Personal Financial Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Which describes the tax treatment of a health savings account (HSA) used for qualified medical expenses?