Which type of account offers tax advantages for medical expenses?

A Health Savings Account (HSA) is specifically designed to provide tax advantages for medical expenses. Contributions to an HSA are made with pre-tax dollars, which lowers taxable income for the contributor. Additionally, the funds in an HSA can be used tax-free for qualified medical expenses, further enhancing its tax benefit. Another advantage of HSAs is that unused funds roll over from year to year, meaning that account holders can accumulate savings for future medical needs without facing a "use it or lose it" penalty that is associated with some other types of accounts.

In contrast, while a flexible spending account (FSA) also provides some tax benefits for medical expenses, it often has a "use it or lose it" policy, which can limit the utility of the funds. Retirement savings accounts, on the other hand, are primarily intended for saving for retirement and have different tax implications that do not typically focus on immediate medical expenses. A standard savings account does not offer any specific tax advantages related to medical expenses and is subject to regular income tax on the interest earned. Therefore, HSAs stand out as the most beneficial choice for managing and saving for medical costs with tax efficiency.