Health Savings Accounts (HSAs) are a tax-savvy way to manage escalating medical costs. These accounts allow individuals and families to save pre-tax dollars for qualified medical expenses, gaining significant tax benefits in the process.
What is an HSA?
An HSA functions like a savings account specifically for healthcare expenses. For 2025, contribution limits have increased, allowing families to save up to $8,550 (up from $8,300 in 2024) and individuals to save up to $4,300 (up from $4,150 in 2024). These contributions grow tax-free and can be withdrawn tax-free for qualifying medical expenses like doctor visits, prescriptions, and even long-term care premiums.
Key Benefits of HSAs:
• Tax-free contributions, growth, and withdrawals.
• Employers can contribute, and funds roll over annually without expiration.
• HSAs are portable, staying with you even if you change jobs.
• Self-employed individuals and businesses with high-deductible health plans benefit from lower premiums while ensuring coverage for major medical issues.
For example, a small business with 15 employees could save $17,000 annually by switching to a high-deductible plan paired with HSAs, while employees retain control of unused funds.
HSAs also allow taxpayers to roll over balances from older Archer Medical Savings Accounts tax-free and avoid the “use it or lose it” limitation of FSAs. However, using HSA funds for non-qualified expenses incurs taxes and penalties.
HSAs are a win-win for businesses, employees, and the self-employed alike, offering tax savings and financial flexibility.
For personalized guidance on how an HSA can fit into your financial plan, contact Verity CPAs at info@verity.cpa or 808.546.5026.
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