Health Savings Account Tax Deduction

Health savings accounts are special savings accounts for people to put aside money for health emergencies. The money can be invested and withdrawn at any time, and has several tax advantages.

Deductions for Contributions

Any contributions made to a health savings account are deductible up to the contribution limit as an above-the-line deduction. The contribution limit for 2009 is $3,000 for an individual and $5,950 for a family plan.

Growth of Contributions

You do not have to pay taxes on any interest or capital gains on the money in the health savings account.

Withdrawal

As long as the money is used for qualifying medical expenses, the contributions and any earnings on the contributions are taken out tax free.

Deposits from Others

If someone else such as an employer contributes money into your health savings account, you are eligible to take the tax deduction.

Qualified Distributions

Distributions can be used for a range of medical services, including medical, dental and vision care as well as over-the-counter medications. If you are older than 65 or enrolled in Medicare, you can withdraw your money without paying the 10 percent penalty for nonqualified withdrawals.

References

• HSA FAQs
• HSA Information