1. Good question, Mark. HSA is the only account that I’d call a truly tax free account: it’s tax deductible at contribution, it’s tax free on withdraw and its growth is tax free, too. These characteristics of HSA makes it the most tax advantageous account to invest in.


      1. The growth is only tax free if it is used for qualifying medical expenses, otherwise the growth is taxed as income, right?


      2. That’s correct. HSA has its limitations at the time of withdrawal. However, the limitations are not hard to get around and the “qualified medical expenses” is defined very broadly. Because health care cost is getting so high and none of us are exempted from getting sick as we age, I don’t see any reason not to full fund your HSA if you are able to.


  1. Correction, getting up to a $3,000 deduction on a loss is not the same as “the government will pay up to $3,000 of your loss every year!”

    Since it’s a deduction, you’ll be covered an amount equal to your effective tax rate for that $3,000. For example, if you were taxed at a 10% rate, you’d save $300 on taxes.


    1. Thank you for catching that! I meant to say it’s “deductible up to $3000 of your loss”. I will correct it in the post.

      Edit: I realized that you said “effective tax rate” which is actually not true. The way it works is that your net capital loss of that year can reduce your taxable income up to $3000 a year. You can think that as shaving off your income from the top which is taxed at marginal tax rate.


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