Health Savings Account

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Employees who are covered by a high-deductible health plan are eligible for a health savings account (HSA).

An HSA is an employee-owned tax-free account, the monetary contributions to which are used to pay for qualified medical expenses. An HSA allows the individual to determine how much to contribute to the account, as long as the contribution meets the annual minimum.

HSAs have several unique financial advantages.

Contributions are pre-income tax, which reduces the amount of taxable income
After-tax contributions are tax deductible
Funds can go toward current or future qualifies health and medical expenses
Contributions roll over tax-free annually; there is no ‘use-it or lose-it’ rule
Contributions can be invested in other funds
Remains intact for life, even if the employee changes jobs or health plans

Eligibility

In addition to requiring a high-deductible health plan, other eligibility requirements for an HSA include:

Not participating in a flexible spending account (FSA), unless the FSA is a deemed “limited purpose” and only covers dental and vision expenses
Not being enrolled in Medicare
Not being claimed as a dependent on someone else’s tax return

It is important to note that distributions for non-qualified expenses are taxable and subject up to a 20% excise tax unless the person is 65 or older.

Consult with a tax adviser regarding questions about contribution limits, qualifying expenses or anything else related to an HSA.

2026 HSA Limits

Minimum Deductible

Single: $1,700
Family: $3,400

Maximum Contribution

Single: $4,400
Family: $8,750

Catch-up Contribution

For individuals who will be 55 or older by the end of 2026, an additional “catch-up” contribution of $1,000 per year is allowed.

Maximum Out-of-Pocket Expense

Single: $8,500
Family: $17,000