Health Savings Account

A health savings account (HSA) is a tax-advantaged account for medical costs, available with a high-deductible health plan. Contributions through payroll skip federal income tax, Social Security and Medicare, and withdrawals for qualified medical costs are tax-free.

The IRS sets yearly limits for self-only and family coverage, counting what your employer puts in, with an extra catch-up at 55 or older. The money stays yours from year to year, even when you change jobs. A few states tax HSA contributions at the state level.

On a paycheck it is a pre-tax deduction that also lowers Medicare tax. Compare it with a flexible spending account, or see the effect on net pay in the paycheck calculator.