Liz Weston: How to harness your HSA’s superpowers

SUPERPOWER 1: YOU CAN GET TRIPLE TAX BENEFITS

HSAs offer a rare triple tax break : your contributions are deductible, the money grows tax-deferred and withdrawals aren’t taxed if you have qualified medical expenses.

By contrast, withdrawals from other tax-advantaged accounts, such as 401(k)s, are typically taxed as income. If withdrawals are tax-free — as they can be from Roth IRAs — you didn’t get a tax break when you put the money in.

SUPERPOWER 2: YOU DON’T HAVE TO SPEND THE MONEY

Any unspent balances in your HSA can be rolled over from year to year. That’s in contrast to flexible spending accounts , another tax-advantaged way to pay for medical expenses. FSAs require users to spend the money within a certain period or those contributions are forfeited.

FSAs allow you to contribute $2,750 in 2021. Individuals can contribute up to $3,600 to an HSA this year, while families can put in up to $7,200, plus there’s a $1,000 catch-up contribution for people 55 and older.

HSA contributions can be invested — and that means your money can really grow. Even if you have to spend some of the money along the way, the tax-free growth can add up.

SUPERPOWER 3: ANY WITHDRAWAL COULD POTENTIALLY BE TAX-FREE