HSA Calculator: Triple Tax Advantage and Investment Growth

Investing your HSA: projecting the triple tax advantage

The calculator projects an invested US health savings account (HSA): starting balance, annual contribution capped at the 2026 IRS limit ($4,400 self-only, $8,750 family) and employer contribution compound tax-free at your chosen return. It compares the result with a taxable brokerage account funded with the same money after tax.

The calculation

• Annual tax saving = capped contribution × (federal rate + state rate + 7.65% FICA).
• HSA, each year: (balance + capped contribution + employer contribution − any medical withdrawals) × (1 + return).
• Brokerage account: same starting balance, contribution after tax and FICA, employer contribution, and a return cut by 40% of your combined tax rates, i.e. 7.5% × (1 − 0.29 × 0.4) = 6.63%.

Example

Starting balance $12,000, personal contribution $3,900 plus $500 from the employer ($4,400 in total, the self-only limit), 7.5% return, 25 years, 24% and 5% brackets, medical bills paid out of pocket. The tax saving is 3,900 × 36.65% = $1,429 a year, $35,734 over 25 years. The HSA reaches $394,715 against $249,745 in the brokerage account. Withdrawing $800 a year for care, it ends at $336,254.

Assumptions and limits

The IRS limit includes employer contributions: the tool caps your contribution at the limit minus the employer amount. With $4,400 entered and $500 from the employer, it keeps $3,900 from you and invests $4,400 a year; the comparison brokerage account starts from the same $3,900. The FICA exemption is always applied, although it only covers payroll contributions, and the $1,000 catch-up from age 55 is not modelled. A non-medical withdrawal before 65 is taxed plus a 20% penalty. Returns are not guaranteed: this is an indicative projection, not professional advice. To decide each year between an HSA and an FSA, see the site's HSA vs FSA optimizer.

Sources and dates: IRS, Rev. Proc. 2025-19: HSA limits of $4,400 and $8,750 for calendar year 2026; IRS, Publication 969: employer contributions count toward the limit, $1,000 catch-up from 55, 20% additional tax lifted at 65 (checked 14/10/2026).

Frequently Asked Questions

Why is the HSA said to have a triple tax advantage?

Contributions are deductible (or exempt through payroll), investment gains are not taxed and withdrawals for qualified medical expenses are tax-free. With $3,900 contributed a year and a combined rate of 36.65%, the tool shows a saving of $1,429 a year.

What happens if I withdraw HSA money for something other than health care?

Before 65 the amount is added to your taxable income and an additional 20% tax applies. After 65, or in case of disability or death, the 20% tax no longer applies: the withdrawal is simply taxed, like a traditional IRA (IRS Publication 969).

Does the employer contribution count toward the HSA limit?

Yes: in 2026 your contributions plus your employer's cannot exceed $4,400 for self-only or $8,750 for family coverage. If your employer puts in $500, your share is capped at $3,900. The calculator applies this limit: anything you enter above $3,900 is not counted.

Is it better to pay medical bills out of pocket rather than from the HSA?

If you can afford it, leaving the HSA untouched maximises compounding. In the tool, a $12,000 start and $4,400 a year at 7.5% give $394,715 after 25 years, against $336,254 if you withdraw $800 a year for care.

Is this tool really free?

Yes, all tools on Kristools are 100% free and accessible without registration.

Is my data protected?

Yes. All processing is performed directly and securely inside your browser. No personal data is sent to our servers.