HSA Tax Savings Calculator

How it works

An HSA contribution comes off your taxable income. So the saving is just your own tax rates applied to the amount you put in.

That deduction is unusual because of how many taxes it avoids at once. Federal income tax is the obvious one, state income tax may be a second, and money routed through your employer's payroll skips payroll taxes as well:

• contribution: what you put into the HSA over the tax year
• federal %: your marginal tax rate, the rate on your last dollar of income
• state %: the rate your state charges on income, and 0 if it charges none
• FICA %: the payroll tax you skip, and 0 unless the money goes in through payroll

With the defaults above, $4,000 at a 22% marginal federal rate saves $880. A 5% state rate adds $200. Because the money leaves your paycheck before payroll tax is figured, 7.65% of FICA saves another $306.

Add the three together and the year is worth $1,386 to you. That saving means the $4,000 now sitting in your HSA cost you $2,614. Every rate here is yours to set, because none of them is the same for everybody.

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How to use this calculator

1. Enter what you plan to put into the HSA this tax year, counting only your own money and not your employer's contributions.
2. Set your marginal federal tax rate, the rate that applies to your last dollar of income.
3. Enter the rate your state charges on income, or 0 if your state does not tax it.
4. Choose payroll if the money comes out of your paycheck, so the FICA saving is counted, or bank transfer if it does not.
5. Read the tax saved and the after-tax cost, then adjust the contribution to see what a larger or smaller amount is worth.

A worked example: $4,000 into an HSA through payroll

Say you put $4,000 into an HSA this year through your employer’s payroll deduction. Your marginal federal rate is 22%, your state takes 5%, and 7.65% of your pay goes to FICA. At those rates, the contribution cuts your tax bill by $1,386.

The three pieces: $4,000 at 22% federal is $880, the state’s 5% adds $200, and because the money left your paycheck before payroll tax was calculated, skipping FICA is worth another $306. Net it all out and funding the account only reduced your take-home pay by $2,614.

Now change one thing and move the same $4,000 from your checking account instead of through payroll. The income tax deductions still apply, so you save $1,080, but the FICA is gone for good and the net cost climbs to $2,920. Same account, same balance, same year, $306 worse off purely because of the route the money took to get there.

Enter your own contribution and your own rates above to see what your year is worth.

Why is an HSA called a triple tax advantage?

Most tax-advantaged accounts give you one break. A traditional 401(k) or IRA lets money in untaxed and taxes it on the way out, and a Roth IRA does the reverse. A health savings account does both ends, and skips the tax on growth in between.

The figure at the top of this page covers only the first break, the deduction. The growth break is the one most people never collect. Spend the balance every year on this year's prescriptions and the HSA is a useful discount on care, nothing more.

Invest the balance instead, pay small medical bills from ordinary cash, and the untaxed growth compounds for decades. An HSA left alone that way is one of the strongest retirement accounts most people can reach. Unlike a flexible spending account (FSA), it never expires at year end, and it stays yours through a job change or a plan change.

The account is still useful in retirement. Once you reach 65 you can withdraw for any reason and pay only income tax with no penalty. That rule makes an HSA behave much like a traditional IRA.

Qualified medical spending in retirement, including Medicare premiums, still comes out untaxed.

Contribute through payroll, not from your bank

How the money reaches your HSA changes what you save, even when the amount is identical.

• Through payroll: the money leaves your pay before FICA is worked out. So you skip Social Security and Medicare tax on it as well as income tax.
• Direct from your bank: you still claim the deduction on your return. But the FICA on that paycheck has already gone and cannot be recovered.

That gap is not small. At the defaults, routing $4,000 through payroll saves $306 more than sending the same $4,000 from a checking account. Same balance, same tax year, better outcome, purely because of how the money got there.

So if your employer offers an HSA payroll deduction, use it, and set the amount at open enrollment rather than making one-off transfers later. Employer contributions count against the same annual limit. But they were never taxable income to you, so leave them out of the box above.

Two caveats apply. FICA is only saved on earned income while you are working. The Social Security part of it also stops above an annual wage cap, which changes each year.

Where does the money sit once it is in your HSA?

Most accounts open as cash held at a bank or a credit union, and that cash is protected. At a bank, the balance carries FDIC deposit insurance up to the standard limit per depositor. A credit union balance gets the same cover from the NCUA.

Cash is safe, but it earns very little. Providers pay a savings account rate on the balance. So the rate of return on a large HSA left in cash barely keeps up with rising healthcare costs.

That is why most providers let you move anything above a set threshold into investment funds. Those investments carry no FDIC or NCUA cover and the balance can fall, which is the trade for a higher long-run return.

Check what your financial institution charges before you decide, because a monthly fee can outweigh the return on a small balance. You can also move an HSA to another financial institution without losing the tax treatment. So compare the savings account rate, the investment menu and the fees first.

What this number does not tell you

This calculator answers one question: what a contribution saves you in tax this tax year. Whether an HSA is right for you is a separate question, with real conditions attached.

• You need eligible coverage: an HSA requires a High Deductible Health Plan (HDHP), and that plan is not free.
• The deductible is paid in a bad year: no tax saving is worth a plan that leaves you facing a bill you cannot cover.
• Non-qualified withdrawals are expensive: money taken out for anything else before 65 is taxed as income, with a penalty on top.
• Contribution limits are set annually: they depend on your coverage and your age, and this page will not stop you entering more.
• Premiums still have to be paid: a lower premium is part of why an HDHP works, so add up a year of premiums first.
• Routine expenses matter more than the deduction: steady prescription and refill costs can settle the plan question on their own.

Which plan to carry is the question to answer first. The high and low deductible comparison weighs premiums against likely claims. The out-of-pocket cost estimate shows what a year of care actually costs.

HealthCare.gov sets out which plans count as HSA-eligible.