Some investment accounts offer a double dose of tax advantages. For instance, contributions to 401(k)s, 403(b)s, IRAs, and health savings accounts (HSAs) may reduce your current taxable income — saving you cash this year. Also, any investment growth in these accounts is tax deferred — saving you money while you are invested. In the case of HSAs, withdrawals used for qualified medical expenses could be triple tax free: tax-free contributions, earnings, and withdrawals.
Contributions to 401(k)s, 403(b)s, IRAs, and health savings accounts (HSAs) may reduce your current taxable income—saving you cash this year.
What's more, because saving in these accounts can help lower your adjusted gross income, they may be able to help you avoid reaching the income limits for additional tax credits and deductions, like the student loan interest deduction or the personal exemption. That’s a reason why we think a top financial priority for most investors should be to take advantage of IRAs, 401(k)s, and other workplace saving plans.