The HSA offers a triple tax advantage on money in your account:
- Both employer and employee contributions are tax-free
- Withdrawals for qualified medical expenses are tax-free
- Interest accrued on HSA balance is tax-free, and earnings on any investments you may choose to make are also tax free as long as they are used for qualified healthcare expenses.
The HSA can be used to pay for qualified medical expenses that may not be covered by your plan (like vision and dental expenses, hearing aids, wheelchairs, contact lenses, acupuncture and more) with a great tax advantage.
Money in the account can be used tax-free for health expenses when you retire. And, when you turn 65, it can be used for non-medical expenses. However, non-medical expenses will be taxed after age 65.