 type of thing. So the high deductible plan might be more likely to be lower income individuals that have the high deductible plan. And then if you have a high deductible plan, then you might also qualify then the government wants to subsidize those plans. And that's when you might also be able to get these HSAs. So that's kind of a general recap again from my perspective. So some of the terminology we need to know is, are we dealing with a high deductible health plan? And then how are we getting access to the health plan? And if so, you might have an HSA, but there's also another problem that's also thrown into there. And that is that you might have a credit if you have a high deductible health plan for related to health insurance and that credit might be prepaid. And that's another complication to try to determine how much you're paying for for healthcare. Okay, given that HSAs have several tax benefits that make them an attractive option for saving and paying medical expenses. Here's a breakdown of the tax advantages. So you have pre tax contributions. Now, you can think of this as another tool that you can think of as being similar to like an IRA, I compare it to an IRA because I think most people have a more of a better concept of an IRA and the tax consequences with it. And the points of tax consequences that we're questioning are, if I'm putting money into an HSA, which we're imagining to be a savings account here, it is a savings account. There's nothing different about the investment tool itself in a similar way as there's nothing different about usually mutual funds that you're putting money into when you're putting money into an IRA. That the fact that it's under the umbrella of an IRA doesn't change the nature of the financial instrument in that you're still just using a normal financial instrument. It's just under the umbrella of an IRA or in this case an HSA, which actually restricts sometimes the funds that you put into it, which means you would not normally put funds into it unless there's a tax benefit. So the question is, when I put the money in, do I get a tax benefit when that happens? Which would mean I would either lower income or get a deduction when the savings account earns money through interest or if it was dividends or whatnot. Do I have to pay taxes when it earns the money or possibly can I defer them or not pay the taxes? And then when we take the money out of the account, is that a tax triggering effect? And is it something that could also trigger penalties or whatnot? Those are the tax consequences. When I put the money in, when the money grows, when I take the money out, what are the tax consequences? All right, pre-tax contributions. Contributions to an HSA are made with pre-tax dollars, so meaning we're reducing the income, which is good, through payroll deductions, which means they reduce your taxable income. So if you make contributions with those pre-tax dollars, you can deduct the amounts from your gross income on your tax return, reducing your overall tax liability. So note, we have a general question here is, is it happening through work? If it's happening through work, then possibly this will be reflected on the W-2 form. If it's not happening through work, then it's not going to be reflected on the W-2 form, and therefore you might have this above the line adjustment. So tax deductible contributions, contributions you make to an HSA are tax deductible up to the legal limit. For 2023, the IRS has set the contribution limits to $3,850 for individuals and $7,750 for family coverage. Those over 55 years old can make an additional catch-up contribution of $1,000. So tax-free growth. So here we're talking about the next component. You put money in, you get a benefit possibly when you put the money in. What about when the money grows in the savings account through possibly interest, for example. So usually you have to pay tax on interest, right? Tax-free growth. Any interest or other earnings on the money in the HSA grow tax-free, so it can get a good long-term saving strategy. So tax-free withdrawals. So that's the third part. Now what happens when we take the money out? Is that going to be subject to taxes? In which case it would be a deferral. If it's not subject to taxes, then that's great. You didn't have to pay the taxes on it at all, right? So funds withdrawn from the HSA for qualified medical expenses, including deductibles, copayments, and other expenses that health insurance doesn't cover are not taxed. So there's the catch. You have to then make sure that you're in compliance with the rules and then you have to pay for the things that are covered in order for it to qualify to be tax-free. Otherwise, it might be subject to tax when you pull it out as we saw on the income side of things for HSA. So if you withdraw funds for non-medical expenses before age 65, you'll have to pay income tax on the withdrawal plus 20% penalty. Ouch, that's a high penalty.