Triple tax benefit. Employees have likely heard it before.
However, when it comes to health savings accounts (HSAs), do employees really understand what these three words mean to them?
The unique benefits of an HSAs triple tax advantage can seem complicated but when communicated in plain language, understanding is greatly increased. At Further, we aim to provide educational information in clear, uncomplicated language to alleviate any hurdles in health spending account adoption. Here’s an easy way to explain the triple tax benefit down for employees and, ultimately, help increase adoption of HSAs.
HSAs reduce taxable income
Contributing to an HSA will lower an employee’s overall taxable income. When an employee contributes through his or her employer, the money goes into their HSA before taxes are taken out. Plus, any contribution they make on their own is tax-deductible.
Pay no taxes on eligible medical expenses
When an employee uses funds from his or her HSA to pay for eligible medical expenses, they pay no taxes on that money. Plus, they can use their HSA to purchase prescription medications, bandages, chiropractic treatments, reading glasses, and many other items and services.
Earn tax-free interest on HSA funds
Depending on the HSA plan, employees may receive earnings from interest on their HSA balance. The more they contribute, the more interest they can earn on their account. Plus, if employees choose to invest their HSA dollars, they won't be taxed on any earnings from interest, nor does the interest incurred count toward the maximum yearly contribution.
By breaking down the triple tax benefit and showing employees how an HSA can reduce their taxable income, employees are enabled to see value in this powerful tool.
For more helpful resources to share with your clients, and their employees, visit the Further Learning Center. The Learning Center features helpful tools, resources and information in an easily searchable format.
The content of this post is for informational purposes only, is general in nature, is not meant to include all health insurance plan designs and is not intended to and should not be relied upon as legal or tax advice.