What is the primary purpose of a Health Savings Account (HSA)?

A Health Savings Account (HSA) serves as a tax-advantaged account specifically designed to help individuals save money for qualified medical expenses. Contributions to an HSA are typically made pre-tax, meaning that they can reduce taxable income. The funds in the account can be used to pay for a variety of health-related expenses, including deductibles, copayments, and other out-of-pocket costs associated with healthcare services.

Moreover, HSAs offer several tax benefits: the money contributed to the account grows tax-free, and withdrawals for eligible medical expenses are also tax-free. This structure encourages individuals to save for medical costs while providing significant tax advantages, making HSAs a valuable tool for managing healthcare expenses.

In contrast to other options, such as accounts meant for retirement savings with penalties or those specifically for regular expenses, an HSA is distinctively focused on healthcare. It does not allow investment in real estate properties, making the description of it solely as a tax-advantaged account for medical expenses entirely accurate.