Triple tax advantage

Money that you put into your HSA is pre-tax (either via pre-tax payroll contributions or a deduction on your tax return); dividends, interest, and investment gains in the account will accumulate tax-free; and withdrawals are tax free, too (as long as you use the money for qualified medical expenses).

Once you turn 65, you can withdraw money from your HSA for anything you want, without a penalty, although you'll have to pay income tax on the withdrawals if you're not using them for qualified medical expenses. But that means the HSA can be used like a traditional IRA once you're 65, so your HSA can serve as a backup retirement account if that's your preference.

How to maximize your HSA for 2024

The only way to reap those amazing benefits is to contribute to your HSA. Fortunately, the IRS offers a few extra months to do so. This year, you have until April 15, 2025 to make some or all of your 2024 HSA contributions.

And even if your HDHP took effect mid-year (as late as December 1), you can opt to make the full annual contribution to your HSA as long as you also maintain HDHP coverage for the next 12 months. For more information, check out this overview, which details current HSA contribution limits.

If you haven't fully funded your HSA for 2024, take a few minutes when you're filing your taxes to see how much it would change your total tax burden to bump up your HSA contribution for last year. You might be surprised at how much your contribution will "pay for itself" via a lower tax bill or larger refund.

Smart HSA planning for 2025

Missed this year’s tax day deadline? That’s okay! It’s never too late to start contributing. If your HSA contributions are made via payroll, you can earmark your tax refund for things that you would normally have to cover with your paychecks. Then ask your employer to increase your HSA contributions, either temporarily or for the rest of the year, so that your total contributions for 2025 come as close as possible to the contribution limit set by the IRS.

And remember that since HSA contributions are pre-tax, the hit to your paycheck might not be as much as you think since taxes would have been taken out if you had received it in your paycheck instead of directing it to your HSA.

Keep a pulse on your financial (& physical) health

Tax season is an excellent time to check in on your overall financial goals, including your HSA goals. It's also your last chance to fund your HSA for the previous year, and it's a good opportunity to make sure you're on track to fund your HSA for this year, especially if you're expecting a tax refund.

And while you're thinking about funding your HSA, it's also a good time to remind yourself that the purpose of an HSA is to ensure both financial and physical health. So check in with yourself and make sure that you're also spending your HSA funds when you need to (that's why an HSA exists afterall!).

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