Certified Financial Consultant (CFC) 2025 – 400 Free Practice Questions to Pass the Exam

Question: 1 / 400

How do employer contributions to Health Savings Accounts affect an individual's taxable income?

They are added to taxable income

They are subject to self-employment tax

They are not included in taxable income

Employer contributions to Health Savings Accounts (HSAs) are not included in an individual's taxable income. This means that when an employer contributes to an employee's HSA, that amount is excluded from the employee's gross income for tax purposes. This tax advantage makes HSAs an effective tool for saving for medical expenses, as contributions grow tax-free and withdrawals for qualified medical expenses are also tax-free.

This arrangement incentivizes both employer and employee contributions toward health care savings without creating an immediate tax burden for the employee. The funds remain tax-deferred until they're withdrawn for qualified health-related expenses. Overall, this feature enhances the appeal of HSAs as a tax-efficient method of managing healthcare costs.

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They are taxed at the employer level only

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