An HSA (health savings account) lets you put pre-tax money aside, if you have a high-deductible health plan, and spend it tax-free on qualified medical costs. The balance rolls over each year.
Basics
A health savings account (HSA) lets you save pre-tax money for medical expenses. You need a high-deductible health plan (HDHP).
Triple tax advantage
- Contributions are tax-deductible.
- Growth is tax-free.
- Withdrawals for qualified medical expenses are tax-free.
2025 limits
$4,300 for individuals and $8,550 for families, plus $1,000 for ages 55 and older.
HDHP requirement for 2025
Minimum deductible $1,650 (self) or $3,300 (family).
Rules
The money rolls over every year. After 65, you can withdraw for any purpose, taxed like income.
Penalty
20 percent plus tax on non-medical withdrawals before 65.
Investing
Many HSAs let you invest funds.
Check
Confirm current limits with the IRS.
Basics
A health savings account (HSA) is a tax-advantaged savings account for medical costs, available to people enrolled in a qualifying high-deductible health plan (HDHP). The money is yours, even if you change jobs or health plans, and the balance rolls over every year. It can be held at banks, credit unions or brokerages.
Triple tax advantage
- Contributions are tax-deductible (or pre-tax through payroll, which also avoids FICA taxes).
- Growth from interest or investments is tax-free.
- Withdrawals for qualified medical expenses are tax-free.
No other account has all three benefits.
2025 limits
For 2025, the contribution limit is $4,300 for self-only coverage and $8,550 for family coverage. People aged 55 and older can add a $1,000 catch-up contribution. The limits include employer contributions.
HDHP requirement for 2025
To qualify, the plan must have a minimum annual deductible of $1,650 for self-only coverage or $3,300 for family coverage. The maximum out-of-pocket limit is $8,300 for self-only or $16,600 for family coverage. You cannot be covered by other non-HDHP health coverage, be enrolled in Medicare, or be claimed as a dependent.
Rules
- Qualified expenses include doctor visits, prescriptions, dental, vision, deductibles, copays and some over-the-counter items. Insurance premiums generally do not qualify, except for COBRA, long-term care, Medicare premiums and coverage while unemployed.
- Keep receipts. You can reimburse yourself years later, as long as the expense occurred after the HSA was opened.
- After age 65, withdrawals for non-medical expenses are taxed as income but have no penalty.
Penalty
Withdrawals for non-qualified expenses before 65 are taxed as income and carry a 20% penalty.
Investing
Many HSA providers let you invest balances above a threshold (like $1,000 to $2,000) in mutual funds or ETFs. Fidelity, Lively and others offer low-fee accounts. Some people use an HSA as a long-term retirement account for future medical costs, paying current expenses out of pocket.
Check
Make sure your plan is HSA-eligible. Compare fees, investment options, and employer contributions. Report contributions on IRS Form 8889 when you file taxes. Excess contributions are taxed at 6% per year until removed.
Contribution limits and eligibility
For 2025, the HSA contribution limit is 4,300 USD for self only coverage and 8,550 USD for family coverage, with an extra 1,000 USD catch up for those 55 and older. To contribute you must be covered by a high deductible health plan, which in 2025 has a minimum deductible of 1,650 USD for self only or 3,300 USD for family. The money is triple tax advantaged: contributions are pre tax or deductible, growth is tax free, and withdrawals for qualified medical expenses are tax free. Funds roll over each year and belong to you if you change jobs. Withdrawals for non medical costs before age 65 are taxed as income plus a 20 percent penalty, and after 65 they are taxed like an IRA. Many providers allow investing balances above a set threshold. Keep receipts, since the IRS can ask you to prove expenses were qualified.
Based on data from the IRS Revenue Procedure 2024-25 and HealthCare.gov
