How You Can Save Taxes With A Health Savings Account

Health savings accounts, more commonly known by its acronym, HSA, are one of the most tax-advantaged accounts the IRS recognizes. Read below for more information on what an HSA is, who qualifies, and the advantages gained by setting one up.

What is a Health Savings Account (HSA)?

An HSA is a tax-advantaged savings account that is created for people who get their insurance coverage through high-deductible health plans (HDHPs). Contributions to the account made by the employee or employer are tax-exempt income and can be used to pay for qualified medical expenses that are not covered by the HDHPs.

What is considered a High Deductible Health Plan?

For 2025, the IRS defines an HDHP as follows:

• Individuals – minimum annual deductible of $1,650, but not greater than an annual deductible and other out-of-pocket expenses of $8,050
• Family Coverage - minimum annual deductible of $3,300, but not greater than an annual deductible and other out-of-pocket expenses of $16,600

Who Qualifies?

• Covered by a high deductible health insurance plan (HDHP)
• Not covered by any other plan that is not an HDHP
• Not enrolled in Medicare
• Not claimed as a dependent on someone else’s return

Expanded HSA Eligibility (Effective Jan 1, 2026)

Due to provisions in recent federal tax law changes (sometimes referred to as the One Big Beautiful Bill), the IRS updated eligibility rules:

• Bronze and catastrophic health plans — even if they aren’t traditional HDHPs — will now be treated as HSA-compatible, expanding eligibility to more enrollees.

• Telehealth and remote care services remain permanently HSA-eligible before meeting your deductible.

• Individuals enrolled in certain Direct Primary Care (DPC) arrangements may be eligible to contribute and use HSA funds tax-free for periodic DPC fees.

  
  These changes mean more people — especially those with lower-premium, high-deductible plans — can contribute to HSAs starting in 2026.

Maximum Contribution – limits on contributions apply to the total dollars contributed by both employer and employee

• 2025 - $4,350 for an individual and $8,550 for a family
• 2026 - $4,400 for an individual and $8,750 for a family
  
• Individuals 55+ by the end of the tax year can make a catch-up contribution of an additional $1,000
• Contributions can be made until the tax filing due date (April 15 of the year following the tax year)

🔗 Read more about the advantages of an HSA here