Health savings accounts

What’s a health savings account?

A health savings account (HSA) is a tax-advantaged savings account you can use to pay for health care expenses. It’s different from a flexible spending account (FSA) since funds deposited into an HSA do not expire; you can accumulate savings year after year. This information helps you learn about:

• Who qualifies to contribute funds to an HSA.
• How to set up an HSA.
• Annual contribution limits.
• Qualifying expenses.
• Tax benefits.

 Who qualifies to contribute funds to an HSA?

To be eligible for an HSA, you must sign up for a qualifying high-deductible health plan (HDHP). Starting in 2026, if you buy a plan on Healthcare.gov, all Catastrophic and Bronze plans are HSA eligible. Other plans might also qualify; use the search tools on Healthcare.gov to find HSA-eligible plans.

To be HSA-eligible, other plans must meet the annual IRS minimum deductible and maximum out-of-pocket limit. A plan cannot cover any care before you meet the deductible, except for preventive care and telehealth.

 These eligibility requirements determine whether you can contribute to an HSA, not whether you can spend the funds. For example, you might contribute to an HSA for many years if you have an HSA-eligible plan through work, before retiring and enrolling in Medicare, which is not HSA-eligible. While you can't make more contributions to your HSA after you enroll in Medicare, you can continue spending your HSA funds on qualifying expenses.

How do you set up an HSA account?

After enrolling in an HSA-eligible plan, you must set up an HSA through a financial institution. Many banks and credit unions offer HSAs. You should compare options the way you would compare other types of savings accounts, considering minimum fund requirements, fees, interest rates, customer service, and investment opportunities.

Healthcare.gov has information on setting up an HSA.

How much can you contribute to an HSA?

The IRS updates the maximum amounts each year. People who are age 55 or older can contribute an extra $1,000 each year.

What health care expenses can you use HSA funds for?

Qualifying health care expenses include:

• Cost-sharing amounts, like your deductible, copays, and coinsurance.
• Doctor visits and hospital care.
• Dental and vision expenses.
• Prescriptions and over-the-counter pharmacy items (Band-Aid, thermometers).
• Medical equipment (hearing aids, crutches, blood sugar monitors).
• Fees for direct primary care memberships up to $150 per month per person or $300 per month for families.

Non-qualifying health care expenses include:

• Cosmetic and elective procedures (Botox, hair transplants).
• General health and wellness (gym memberships, vitamins and supplements not prescribed to treat a specific illness).
• Personal care items (toiletries, toothpaste, deodorant).
• Insurance premiums (most premiums are not eligible to be covered by HSA savings with exceptions for COBRA plans, long-term care, or retiree health coverage).

 What are the tax benefits of an HSA?

Health savings accounts have a triple tax benefit when used for qualifying medical expenses.

1. Tax-deductible contributions.
   The amount you contribute (up to the maximum limit) will reduce your taxable income (or be pre-tax if made through a payroll deduction).
2. Tax-free growth.
   Funds in an HSA can earn interest or be invested in stocks, bonds, and mutual funds. You won't have to pay taxes on any interest, dividends, or capital gains earned on your HSA funds.
3. Tax-free withdrawals.
   When you spend your HSA funds on qualifying health care expenses, you are not taxed on those withdrawals.