What is an important feature of a Health Savings Account (HSA)?

A Health Savings Account (HSA) is designed specifically to encourage individuals to save for qualified medical expenses while enjoying certain tax benefits. One of the most significant features of an HSA is that contributions made to the account are tax-deductible, meaning that they can reduce your taxable income. Additionally, any interest or earnings accrued in the HSA grow tax-free, and withdrawals used for qualified medical expenses are also tax-free. This trio of tax advantages makes HSAs a highly effective tool for managing healthcare costs.

The other options do not accurately reflect the features of an HSA. For instance, HSAs can be used for a wide range of medical expenses, not just dental. They are also generally low-cost to maintain, without high annual fees, and there are no age restrictions regarding their availability, making them accessible to anyone with a qualifying high-deductible health plan.