Health savings accounts offer substantial tax benefits for putting aside money for future health expenses. You can contribute to an HSA in two ways: either through your payroll deductions or by depositing money directly into your HSA. The tax implication of your contributions depends on the method you choose.
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FICA Tax Implications
If you contribute to your HSA through a payroll deduction, the money is excluded from both income taxes and FICA taxes. For example, if you contribute $1,000 through payroll deductions, you won't have FICA taxes withheld on that $1,000 and your W-2 will show $1,000 less income. In contrast, if you make a contribution on your own, your W-2 will show that $1,000 of income but you get to claim the contribution as an income tax deduction. However, it doesn't reduce the amount of FICA taxes you owe.