Which of the following is a characteristic of health savings accounts?

Health savings accounts (HSAs) are designed to offer a tax-advantaged way to save for medical expenses. One of the key characteristics of HSAs is that contributions made to these accounts are tax-deductible. This means that when individuals contribute to their HSA, they can deduct those contributions from their taxable income, effectively lowering their overall tax liability.

This tax benefit incentivizes individuals to save for healthcare costs and provides them with a financial advantage when managing their health expenses. Additionally, funds in an HSA can grow tax-free and withdrawals for qualified medical expenses are also tax-free, further enhancing their attractiveness as a savings tool for healthcare needs.

In contrast, options that suggest limits on how the funds can be used, such as only for co-pays, misrepresent the flexibility that HSAs offer. Additionally, while contributions to HSAs may be tax-free depending on the context, it is the tax-deductibility of contributions that is a core characteristic, rather than a general tax-free status. Lastly, classifying withdrawals as taxed goes against the fundamental advantage of HSAs where withdrawals for qualified medical expenses are not taxed, thus supporting the correct understanding of the characteristics of health savings accounts.