May
09
Comparing HSAs to 401(k)s and IRAs
Here’s how HSAs stack up with two other popular retirement investment vehicles, 401(k)s and IRAs:
| HSA | 401(k) | IRA | |
|---|---|---|---|
| Do you have to pay federal tax on contributions? | No | No | No |
| Do you have to pay state tax on contributions? | No, unless you live in CA or NJ | No | No |
| Do you have to pay FICA on contributions? | No, if you contribute through pre-tax payroll withholding | Yes | Yes |
| Do contributions grow tax-free? | Yes, unless you live in CA, NH*, NJ, or TN* | Yes | Yes |
| Are you taxed on withdrawal for non-medical costs? | Yes | Yes | Yes |
| Are you taxed on withdrawal for medical costs? | No | Yes | Yes |
| Is there a required minimum distribution? | No | Yes | Yes |
Ready to open up an HSA? Get started here.
*New Hampshire and Tennessee only tax dividend and interest earnings after a certain dollar amount, depending on whether you’re filing individually or married filing jointly. That dollar amount is the limit for all of that year’s dividend and interest earnings, not just what came from your HSA.
In New Hampshire, residents must only file dividend and earnings income tax returns if they collect dividend and interest income for that year totaling more than $2,400 (if filing individually) or $4,800 (if married filing jointly).
In Tennessee, residents must only file dividend and earnings income tax returns if they collect dividend and interest income for that year totaling more than $1,250 (if filing individually) or $2,500 (if married filing jointly).
