HSA (Health Savings Account)

A Health Savings Account (HSA) is a personal, tax-advantaged account you can use to pay for qualified medical expenses. It is only available to people enrolled in a High-Deductible Health Plan (HDHP), and it is one of the most powerful tax shelters in the U.S. tax code because of its triple tax benefit.

The triple tax benefit

HSAs are unusual because the money gets tax-favored treatment three different ways:

• Deductible contributions: money you put in reduces your taxable income for the year (above-the-line deduction, no need to itemize).
• Tax-free growth: any interest, dividends, or investment gains inside the HSA grow tax-free.
• Tax-free withdrawals: when you spend the money on qualified medical expenses, no tax is owed on the withdrawal.

No other account combines all three. A 401(k) gives you deductible contributions and tax-free growth but you pay tax when you withdraw. A Roth IRA gives you tax-free growth and tax-free withdrawals but no upfront deduction.

2026 contribution limits

For tax year 2026:

• Self-only HDHP coverage: $4,300
• Family HDHP coverage: $8,550
• Catch-up contribution (age 55+): additional $1,000

You can contribute through payroll deduction if your employer offers it (which also avoids FICA tax on the contribution) or directly to the account.

You must have an HDHP

An HSA is only legal if you are enrolled in a qualified HDHP. For 2026 the HDHP rules are:

• Minimum deductible: $1,700 self-only / $3,400 family
• Maximum out-of-pocket: $8,500 self-only / $17,000 family

Marketplace plans that meet these rules are labeled “HSA-eligible” or “HDHP” in the HealthCare.gov plan finder. If you pick a non-HDHP plan you cannot open or contribute to an HSA.

HSA money carries year to year

This is the biggest difference from an FSA. HSA balances roll over indefinitely. The account is yours, not your employer’s. If you change jobs, change insurance, or retire, the HSA stays with you. Many people use HSAs as a stealth retirement account: contribute every year, pay current medical bills out of pocket, let the HSA grow invested for decades, and use the balance for healthcare in retirement.

Example

A 40-year-old self-employed designer in Texas with MAGI of $60,000 picks an HSA-eligible Bronze plan with a $5,000 deductible. They contribute $4,300 to their HSA:

• Federal tax savings (22% bracket): about $946
• The $4,300 is available immediately to pay the deductible if they get sick
• If they stay healthy, the $4,300 stays invested and grows tax-free

Related terms

• FSA (Flexible Spending Account)
• HRA (Health Reimbursement Arrangement)
• Deductible
• Premium

Run the calculator to find HSA-eligible Bronze plans in your county.