What are the tax benefits associated with a health savings account (HSA)?

The tax benefits associated with a health savings account (HSA) are significant, especially regarding withdrawals for qualified medical expenses. With these accounts, individuals can make tax-free withdrawals for healthcare costs that meet the IRS criteria. This means that if you use the funds in your HSA for eligible medical expenses, you won't owe any taxes on those withdrawals, allowing you to save money on necessary healthcare costs.

In addition, contributions made to an HSA are tax-deductible, which provides an upfront tax advantage when you contribute. Furthermore, the growth of the investments within the HSA is tax-deferred, meaning you don’t pay taxes on any earnings as long as the funds remain in the account. This combination makes HSAs a powerful tool for managing healthcare costs and taxes.

Regarding the other choices, while HSAs offer tax-deferred growth and contributions are tax-deductible, they do not provide tax credits for contributions, and there are indeed tax implications at various points in the use of the account. Therefore, the ability to withdraw funds tax-free for qualified medical expenses accurately embodies the key tax benefit of an HSA.