Could Having an HSA Save You Six Figures on Lifetime Taxes?

HSA, health savings account symbol.
Nastassia Samal / Getty Images/iStockphoto

It’s almost open enrollment season, and when it comes to making new financial calls, you might want to consider taking part in — or upping — your health savings account (HSA) contributions. Doing so could help you save up to six figures on tax payments over a lifetime.

Writing an op-ed for Kiplinger, certified financial planner Matthew Broom shared a scenario detailing how a young couple could save up to $160,000 in taxes owed over time by tapping into HSAs, especially if you have what’s considered to be a high deductible health plan. 

According to the official site for the Affordable Care Act (, an HSA is defined as a savings account in which you can contribute pre-tax dollars to pay for qualified medical expenses. Per the site, “By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs.”

This comes into play as a particularly great benefit when you have a high-deductible health care plan, which are becoming more attractive to Americans as a cost-saving measure as health care premiums continue to rise every year. This is especially true for young people, who may be relatively healthy and don’t invest in a ton of coverage — if they don’t visit the doctor that often and don’t have many regular prescriptions they need to take.

The IRS defines a high-deductible health care plan as one that has any deductible over $1,500 for a single individual and $3,000 for a family plan — and annual out-of-pocket expenses of less than $7,500 for single people and $15,000 for families. However, high-deductible plans typically feature lower premiums. 

Make Your Money Work for You

So for someone paying a lower premium on their monthly health care plan and also using pre-tax dollars to invest into an HSA, Broom said they’re able to enjoy greater tax savings while also creating a “health care nest egg” for potential future expenditures. 

As Broom further noted, there’s a “triple tax savings” rationale as to why you should contribute to an HSA. For one, you get a tax deduction — in 2023, that’s up to $3,850 for individuals and $7,750 for families. If investments are made within an HSA rather than sitting in cash, any investment growth is tax-deferred. Further, should funds within the HSA be used for qualifying medical expenditures, distributions are tax free. The best part is, per CNBC, HSAs don’t have an annual “use it or lose it” policy — you can continue to save value in the account over time, without having to worry about using the contributions within the given year.

Broom also explained a scenario wherein the six-figure savings can add up. Take, for example, a young married couple (aged 35) who have a combined income of $225,000. They also have a family health care plan provided by one of their employers. 

If they contribute the maximum amount to their HSA every year until the time they retire 30 years later, they will have saved $500,000 in their HSA (assuming the contribution limits are upped 1% yearly, the money invested earns 5% annually and they take advantage of a $1,000 “catch up contribution” every year starting at 55 years of age).

With their annual tax savings from contributing these funds to an HSA (which Broom noted is 24% for federal, 5% for their state and 7.65% for FICA), the couple can also enjoy a lifetime tax savings of $160,000.

Make Your Money Work for You

CNBC also pointed out that after age 65, you can actually use the vested funds in your HSA account for any kind of expense — not just health care — though doing so will incur a tax penalty.

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