What is an HSA?
A Health Savings Account (HSA) is a tax-advantaged savings account designed to help individuals save money for future qualified medical expenses. The HSA is only available to persons with high-deductible health insurance plans (HDHPs).
For federal tax purposes, contributions to an HSA are generally tax deductible, which means the money you contribute to your HSA can be deducted from your gross income when calculating your taxable income, reducing your overall tax liability.
When you withdraw money from your HSA, the withdrawals are not included in taxable income so long as the money was used to pay for qualified medical expenses.
Example Form 8889 Tutorial
This video tutorial covers a sample Form 8889 (Health Savings Account) for the 2023 tax year. This example covers a scenario where an individual has an HSA set up through his employer.
The employer contributed $1,000 in 2023, while the individual contributed an additional $750 in 2023. The taxpayer also withdrew $185 to pay for qualified medical expenses, which he must also disclose on Form 8889.