How to Save Over $900 on Your Tax Bill in 2024 with a Health Savings Account

As a CPA, I often advise clients on strategies to reduce their tax bills. One effective method is utilizing a Health Savings Account (HSA).

What is an HSA?

A Health Savings Account (HSA) is a tax-advantaged account designed to help individuals save for medical expenses. Contributions to an HSA are tax-deductible, and the funds can be used for qualified medical expenses without incurring taxes.

Contribution Limits and Tax Savings

For the tax year 2024, individuals can contribute up to $4,150 to an HSA. If you’re in the 22% tax bracket, this contribution may save you over $900 on your federal tax bill.

How to Open an HSA

Opening an HSA is straightforward and can be done in just a few minutes. HSA Bank is one such provider. Once your account is set up, you can start making contributions.

Using Your HSA Funds

The funds in your HSA must be used for qualified medical expenses to avoid penalties. However, if you’re over 65, you can withdraw the money for any purpose without penalties, though it will be subject to income tax if not used for medical expenses.

Investing Your HSA Funds

I recommend my clients maximize their HSA contributions each year and invest the funds in a long-term investment vehicle, such as the S&P 500. Historically, the S&P 500 has returned about 10% annually. For example, a $4,150 investment in 2025 could grow to nearly $28,000 by 2045, assuming a 10% annual return.

Key Takeaway

If you have extra money in your bank account, consider opening an HSA. Not only can it provide significant tax savings, but it also offers a way to invest in your future healthcare needs. Plus, it serves as a financial safety net in case of major medical events.