The first option would be the best tax outcome, *IF* it is allowable.
Do you still have a High Deductible Health Plan (HDHP), so that you are eligible to contribute to the HSA? The maximum amount you can contribute depends if you have a 'family' HDHP or if it only covers you, and your age. If you are not sure about the maximum amount you can contribute, please let us know (1) if your health insurance qualifies as a HDHP, (2) if it is a 'family' plan, and (3) your age.
