HSA (Health Savings Account)
A triple-tax-advantaged savings account for medical expenses, available with high-deductible health plans. Contributions are tax-deductible, growth is tax-free, and qualified withdrawals are tax-free.
A Health Savings Account (HSA) is a tax-advantaged account available to individuals enrolled in a High-Deductible Health Plan (HDHP). For 2026, contribution limits are $4,400 for self-only coverage and $8,750 for family coverage, with an additional $1,000 catch-up for those 55 and older.
The HSA offers a unique triple tax benefit: contributions are tax-deductible (or pre-tax if made through payroll), investments grow tax-free, and withdrawals for qualified medical expenses are tax-free. No other account in the tax code offers all three benefits simultaneously.
Many financial planners recommend using the HSA as a long-term investment vehicle. You can pay current medical expenses out of pocket, let your HSA balance grow and invest for years, then reimburse yourself for those expenses at any time in the future. After age 65, HSA funds can be withdrawn for any purpose — non-medical withdrawals are simply taxed as ordinary income (like a Traditional IRA), with no penalty.
How it works
An HSA is a savings account available only to people enrolled in a High-Deductible Health Plan, and it offers a triple tax benefit no other account provides: contributions are tax-deductible, or pre-tax through payroll, the balance grows tax-free, and withdrawals for qualified medical expenses are also tax-free. For 2026, you can contribute up to $4,400 for self-only coverage or $8,750 for family coverage, plus an extra $1,000 if you're 55 or older.
If your employer offers HSA payroll deductions, your contributions come out pre-tax and are reflected on your W-2; if you contribute directly to the account yourself, you claim the deduction as an above-the-line adjustment on Schedule 1 when you file. You use the HSA debit card or a reimbursement process to pay for qualifying costs like doctor visits, prescriptions, and dental and vision care, and the account is yours to keep even if you change jobs or health plans.
Many people treat the HSA less like a spending account and more like an extra retirement account: pay current medical bills out of pocket, let the HSA balance invest and compound for years or decades, then reimburse yourself for those old expenses anytime in the future — there's no deadline on when you claim the reimbursement, as long as you kept the receipt. After age 65, HSA funds can be withdrawn for any purpose, not just medical, with non-medical withdrawals simply taxed as ordinary income and no penalty, functioning much like a Traditional IRA at that point.
Example: HSA triple tax advantage
A self-employed worker with self-only HDHP coverage contributes the full $4,400 to an HSA in 2026, taking the full amount as an above-the-line deduction that lowers their AGI directly, saving them tax at whatever their own marginal rate is.
Over the next 15 years, the $4,400 grows tax-free to about $9,100 through investment returns inside the HSA. When the worker withdraws the full $9,100 to pay for a medical procedure, none of it — neither the original contribution nor the $4,700 of growth — is taxed, because it's a qualified medical withdrawal.
Frequently asked questions
Who is eligible to contribute to an HSA?
What happens to unused HSA money at year end?
Can I use HSA funds for non-medical expenses?
Related Terms
FSA (Flexible Spending Account)
An employer-sponsored account that lets you set aside pre-tax dollars for medical expenses or dependent care. Unlike HSAs, FSAs generally have a use-it-or-lose-it rule.
Above-the-Line Deduction
Deductions subtracted from gross income to arrive at AGI, available regardless of whether you itemize. Examples include IRA contributions, student loan interest, and HSA contributions.
Medical Expense Deduction
An itemized deduction for unreimbursed medical and dental expenses that exceed 7.5% of your AGI. Qualifying expenses include doctor visits, prescriptions, insurance premiums, and more.