HSAs in 2026 are going to be changing with higher limits and now, even more health plans will be available to qualify. The 2026 tax changes will allow a lot more Americans to take advantage of the triple tax benefit HSAs provides. This is all good news.
What Is an HSA (Health Savings Account)?
It’s pretty simple. However, a lot of times, clients feel confused. They will ask me, Sonia “What is an HSA? It just seems so complicated.”
An HSA (Health Savings Account) is a special medical savings account you can open if you have a High Deductible Health Plan. It’s one of the simplest tax-saving tools available today. And as a licensed CPA, I just love the tax benefits of it. You just go to into your brick and mortar bank or online provider and ask them to open an HSA account. Any money you put into the HSA is deductible before adjusted Gross Income or what is known as AGI. By utilizing the HSA, you will lower your AGI (the number the IRS uses to calculate how much you owe in federal taxes), so you end up paying less taxes.
At the end of the year, your bank will send you Form 5498-SA that reflects all of your deposits, and Form 1099-SA that shows your withdrawals from the HSA account.
How Do You Contribute?
Once you open the account, what do you do next? You simply take your regular money and deposit it into the account up to the total annual contribution limits. These depend on whether you’re single, head of household, or married. Each year these limits go up.
HSA Contribution Limits for 2025
- Single: $4,300
- Family Coverage: $8,550
- Age 55+: Additional $1,000 per eligible individual
If one spouse is over 55, you can contribute an additional $1,000. If both are over 55, you can contribute $2,000.
Knowing these limits is important because if you over contribute, you will be penalized on the excess contribution amount. Most people keep it at the limits.
What can You Use HSA Money for?
You can use this money for medical expenses, prescription medicine, and many items that are for your health. More than likely, anything prescribed will qualify.
How Do You Qualify for an HSA?
You must have a high-deductible health insurance plan. That means:
- Minimum deductible for singles: $1,650/year
- Minimum deductible for families: $3,300/year
You also cannot qualify for an HSA if:
- You have a flexible spending account (through your spouse)
- You are enrolled in Medicare
- You can be claimed as a dependent on someone else’s tax return
“But I’m Healthy – Why Do I Need This?”
Here’s where HSAs get interesting. What happens with this money long-term? How can it become a financial tool?
An HSA can work for you now and also become a long-term tax-deferred investment.
Example: Single Individual (2025 Numbers)
- Max contribution: $4,300/year
- 10 years of contributions: $43,000
- Tax savings annually at 20% tax bracket: $860/year
- Total tax saved over 10 years: $8,600
- Growth at 4% interest over 10 years: $8,625
Example: Married Couple
- Max contribution: $8,550/year
- 10 years of contributions: $85,500
- Total tax savings over 10 years: $17,100
- Growth at 4% over 10 years: $17,051
HSA as a Retirement Tool
If you don’t use the money for medical expenses and let it grow, it becomes even more valuable long-term. When you turn 65, you can take this money out without penalty. At that point, it becomes similar to a retirement account.
Most people have limited income once they retire. Properly withdrawing this money may mean it isn’t taxable at all, yet you benefited from years of tax-deferred savings.
Saving roughly $860 a year could make a huge impact.
Using the HSA Strategically
Even if you’re healthy, you will likely still go to the doctor and have medical expenses. You can:
- Use the funds only for medical expenses and let the rest grow
- Invest the unused funds in stocks, bonds, or interest-bearing accounts
- Let it accumulate year after year — it never disappears
Common HSA Mistakes to Avoid
- Do NOT take the money out unless it’s for medical expenses because taxes and penalties will apply
- Keep receipts for what you use it for
- Do NOT assume you qualify — verify first
- If using for investment, make sure your HSA is placed somewhere it can earn and grow
Final Thoughts
Now you know what an HSA is, how to qualify, and what to do with the funds. Remember this can be used now and also serve as a powerful long-term retirement tool.
If you have any questions, please give us a call