Health savings accounts (HSAs) were designed by Congress to give people more control over how they spend their health care dollars. These unique accounts offer significant tax advantages and savings for account holders. Thanks to recent tax legislation, contribution limits increase on an annual basis, allowing savings to grow progressively year after year.

Tax treatment of HSAs
An HSA, like an individual retirement account (IRA), is generally exempt from taxes. Earnings on amounts in a deposit account are not included in gross income as long as they are held in the HSA.

Individual contributions
Contributions made by an eligible individual to an HSA are deductible from their adjusted gross income. Individuals contributing to their own HSAs can choose to deduct the contributions as medical expense deductions under section 213(d) instead.

Employer contributions
Employer contributions to eligible individuals' HSAs are treated as employer-provided coverage for medical expenses under an accident or health plan and do not increase the employee's gross income. Contributions to an employee's HSA through a cafeteria plan are treated as employer contributions. The employee cannot deduct employer contributions on his or her federal income tax return as HSA contributions or as medical expense deductions under section 213(d).

Distributions
Distributions from HSAs used exclusively to pay for qualified medical expenses of the account beneficiary, spouse, or dependents are not counted included in the account holder's gross income. However, any amount of the distribution not used exclusively to pay for qualified medical expenses of the account beneficiary, spouse, or dependents does increase the account holder's gross income. This amount is subject to an additional 10 percent tax, except in the case of distributions made after the account holder's death, disability or turning 65.

> Download relevant tax forms
> See state-specific tax information

Health savings accounts are offered by OptumHealth Bank, Member FDIC, and are subject to eligibility. This communication is not intended as legal or tax advice. Please contact a competent legal or tax professional for personal advice on eligibility, tax treatment and restrictions. Federal and state regulations are subject to change. Please check your health benefit plan materials to determine whether your employer will make supplemental contributions to your HSA.