Health Savings Accounts (HSAs) combine the benefits of both traditional and Roth 401(k)s and IRAs for medical expenses. Taxpayers receive a 100% income tax deduction on annual contributions, they may withdraw HSA funds tax-free to reimburse themselves for qualified medical expenses, and they may defer taking such reimbursements indefinitely without penalties.
HSAs are unique - “IRAs on Steroids” - with triple tax advantages:
- Tax-deductible contributions,
- Tax-free accumulation of interest and dividends tax-free, and
- Tax-free distributions for qualified medical expenses.
Photo Credit: Flickr, i eated a cookie
