What is an HSA (Health Savings Account)?

What are the key features of an HSA?

An HSA is a tax-advantaged personal savings account designed to help individuals with high-deductible health plans (HDHPs) save for certain medical expenses. This offers a unique way to manage healthcare costs efficiently.

One of the best things about HSAs is the triple tax benefit. This means that you don’t pay taxes on:

• The money you put in, 
• The money the HSA earns, or
• The money you take out for medical bills.

HSAs are also portable, meaning the money stays with you even if you change jobs or health plans. You can use the money for many different medical costs, and any money you don’t use rolls over to the next year. This lets you build a savings reserve to use on future costs.

Limits on HSA Contributions

For calendar year 2026, you can put in the following amounts to your HSA:¹

• Self-Only Coverage: Up to $4,400 (up from $4,300 for 2025)
• Family Coverage: Up to $8,750 (up from $8,550 for 2025)
• Catch-Up Contributions: If you’re 55 or older, you can put in an extra $1,000.

What is an HSA used for?

You can use your HSA to help pay for eligible medical expenses, including prescriptions, doctor visits, and even some over-the-counter medications.

You can also use your HSA as a tax-advantaged savings account. HSAs don’t have a "use it or lose it" rule, so any money you don’t use rolls over to the next year and continues to earn interest.

HSAs can be a great way to save on health care (and non-health care) costs in retirement. After age 65, you can use the money for anything, but you’ll have to pay taxes if you use it for non-medical purchases. Talk with your financial or tax advisor to learn more.

How do HSAs work?

Setting up and using a health savings account is easy. Here’s how to do it:

1. Enroll in a health plan

First, sign up for a high-deductible health plan that meets IRS rules.

2. Open an HSA

You can open an HSA through your employer, a bank, or a financial company. Some employers will automatically contribute to your HSA.

3. Put money into your HSA

You can add money to your HSA up to the limit set by the IRS. This money is tax-free, and you, your job, or your family can add to it. The account will also earn interest.

4. Use your HSA funds

Take money out of your HSA to pay for medical expenses. These withdrawals are tax-free as long as you use them for eligible expenses. You can reimburse yourself, essentially, for HSA purchases. 

You can add money until the tax filing deadline for the previous year. Some HSAs let you invest your money, so you can grow it over time. Keep track of your contributions and withdrawals for tax reasons and to follow IRS rules.

What are the requirements of an HSA?

To get an HSA, you need to meet the following rules and requirements.

• You must have an HDHP that meets the IRS rules for high deductibles and out-of-pocket maximums
• You cannot have any other health insurance except for dental or vision plans.
• You can’t be claimed as a dependent on someone else’s tax return.
• You must be a U.S resident and reside in the United States.

How do you pair an HSA with a high-deductible health plan?

An HSA is especially useful if you have a HDHP. An HDHP is any health plan that typically has a lower monthly premium and a higher annual deductible than traditional plans. If you have an HDHP, using an HSA to help pay for some expenses can be beneficial over time.

What’s the difference between an HSA, HRA, and FSA?

HSA vs. HRA

The main difference between an HSA and HRA (Health Reimbursement Account) is ownership. While an HSA is owned by the individual, an HRA is owned by the employer. HSA's have contribution limits set by the IRS, while an employer determines the limit for HRAs. Typically, money in an HRA does not roll over year-to-year or go with you if you change jobs, like HSA funds do. Learn more about the differences between HSAs and HRAs.

HSA vs. FSA

The key differences between an HSA and FSA (Flexible Spending Account) are portability and long-term savings.

With an HSA you own the account. You can take it with you if you leave a job and keep it as long as you like. It’s like a long-term savings account with flexible uses.

An FSA has limitations. The funds typically need to be used during the plan year. You lose any unused dollars (there may be exceptions depending on your plan design). The account is tied to your health plan, and you can’t take it with you. Learn more about the differences between HSAs and FSAs.

Is an HSA worth it?

An HSA has big tax benefits. You don’t pay taxes on the money you put in, the money grows without taxes, and you can take it out tax-free to pay for medical bills. Over time, an HSA may be able to save you money.

Tax Savings

You don’t pay taxes on the money you put in, the money it earns, or the money you take out for medical bills.

Flexibility

You can use HSA money for many healthcare costs, like deductibles, copays, and coinsurance.

Money Stays With You

Unlike other health care accounts like FSAs and some HRAs, you don’t lose your HSA money if you don’t use it. It stays with you and can grow over time. It’s yours.

You can think of an HSA as a cross between a regular savings account and a retirement account, which can make it worth it when planning how to pay for eligible health care expenses.

Why should you consider an HSA?

If you have a high-deductible health plan, an HSA can be a smart choice for your health care planning. HSAs save you money on taxes and give you a tax-free way to save for future medical bills. You can use the money for many different medical costs, and you don’t have to use it all in one year. After age 65, you can use the money for anything, though you’ll pay taxes on non-medical uses. Whether you need to pay for medical bills now or are saving for the future, an HSA can give you the financial security and flexibility you need.

¹ Rev. Proc. 2015-19, IRS, https://www.irs.gov/pub/irs-drop/rp-25-19.pdf, May 1, 2025