Frequently Asked Questions
How much money could I conceivably save by opening an HSA?
You saving the income tax on each contribution (since the money goes into your account straight from your paycheck, before Uncle Sam gets his cut.) As long as the money stays in the account, you pay no income, short or long-term capital gains tax on that money, no many how times you move it from investment to investment. Finally, when you withdraw money from the account for medical purposes, your withdrawal is, again, tax-free.
These savings can be sizeable. The U.S. Treasury Department reports that a $2,700 annual contribution to an HSA could result in federal income tax savings as high as $756 for a head of a household with one dependent child. A married couple could save up to $1417 for a $5,450 contribution. And that's just in the first year.
(Source:
www.treasury.gov/offices/public-affairs/hsa/pdf/hsa-examples.pdf )
Money in the account accrues interest on a tax-free basis, and mutual funds owned by the account enjoy tax-free capital gains as well. You pay no penalties or taxes when you pull money out of the HSA to pay for qualified medical expenses. Money can also be withdrawn for non-medical purposes without penalty after you turn 65, and then, you'd only pay regular income tax on the withdrawals (as if it were salary).