How the Cardinal HSA May Save You Nearly $100K in Taxes

In today's economy, finding smart ways to maximize earnings and minimize tax burdens is crucial. Cardinal Health employees who enroll in the Health Savings Account (HSA) eligible plan can take advantage of substantial tax savings while preparing for future medical expenses. Let's explore how an HSA works, the tax advantages it offers, and a real-world example of how much you could save.

What is a Health Savings Account (HSA)?

An HSA is a tax-advantaged savings account available to individuals enrolled in the Cardinal high-deductible health plan (HDHP). The funds in an HSA can be used to pay for qualified medical expenses, including doctor visits, prescriptions, and other healthcare costs. The most attractive feature of an HSA is its triple-tax benefit:

1. Pre-Tax Contributions – Money contributed to an HSA is tax-free, reducing taxable income.
2. Tax-Free Growth – Funds grow tax-free, meaning any interest or investment earnings in the account are not subject to taxation.
3. Tax-Free Withdrawals – As long as the money is used for qualified medical expenses, withdrawals remain untaxed.

How Much Can Employees Save?

To understand the financial benefit of an HSA, let's consider an example. In 2025, individuals can contribute up to $4,300 to an HSA, while families can contribute up to $8,550. Employees aged 55 and older can also add a $1,000 catch-up contribution.

Example Savings Calculation

Let's assume an employee earns $75,000 per year and contributes the maximum individual limit of $4,300 to an HSA. If the employee is in the 22% federal tax bracket, the estimated tax savings would be:

• Federal Tax Savings: 22% of $4,300 = $946
• State Tax Savings (assuming Ohio at 3.99%): 3.99% of $4,300 = $172
• FICA (Social Security & Medicare) Savings at 7.65%: 7.65% of $4,300 = $329
• Total Annual Tax Savings: ≈ $1,447

For a Cardinal Health employee contributing the family maximum of $8,550, the total estimated tax savings could be over $2,880, making an HSA a powerful financial tool for reducing taxable income.

Potential Lifetime Tax Savings from Maxing Out an HSA

Now, let's take a long-term view. Suppose an employee consistently maxes out their HSA contributions every year for 30 years, investing the funds wisely and allowing them to grow tax-free.

• Total contributions over 30 years (individual limit, not including inflationary increases): $4,300 × 30 = $129,000
• Estimated tax savings over 30 years (not including inflation):
• Federal Tax Savings: $946 × 30 = $28,380
• State Tax Savings: $172 × 30 = $5,160
• FICA Tax Savings: $329 × 30 = $9,870
• Total Estimated Tax Savings Over 30 Years: ≈ $43,410

For employees contributing the family maximum, the total lifetime tax savings could exceed $86,400.  With the effects of inflation factored in, the savings will likely be well over $100K!

Additionally, if the funds are invested wisely, with an average return of 6-8% annually, the HSA account could grow to well over $500,000 tax-free by retirement age, providing a significant financial cushion for healthcare expenses.

Additional Benefits of an HSA

Beyond tax savings, an HSA offers additional advantages:

• Investment Opportunities – Many HSAs allow account holders to invest in mutual funds or ETFs, further growing their savings tax-free.
• Portability – HSAs are not tied to your employment at Cardinal, meaning you can take the funds with you if you leave.
• No Use-It-or-Lose-It Rule – Unlike Flexible Spending Accounts (FSAs), HSAs have no expiration, allowing your funds to accumulate year after year.

Conclusion

For Cardinal Health employees enrolled in a HDHP, an HSA is one of the best tools for lowering tax liabilities while preparing for medical expenses. Whether saving hundreds or thousands of dollars annually or accumulating over $86,400 in lifetime tax savings, this account provides financial security and investment potential that lasts a lifetime!

If you are in an HSA eligible plan, consider maximizing your contributions to take full advantage of the tax benefits!

Take care, and as always, stay the course!

_{Colburn Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.}