The HSA: The Triple-Tax-Break Account

The story: Lee’s doctor bill

Lee holds a receipt at a clinic desk while a friend, Nora, explains three ways to use a health savings account.

1. Narrator: Lee just paid for a doctor visit. Lee’s plan has a high deductible and comes with a health savings account, an HSA.
2. Lee: Should I pay this from the HSA, or from my checking account?
3. Nora: Either can work. HSA money goes in tax-free, can grow tax-free and comes out tax-free for medical costs.
4. Narrator: Some people pay small bills from checking, save the receipts and let the HSA grow. They can pay themselves back years later.
5. Lee: And if money is tight this month?
6. Narrator: Then paying from the HSA now is a smart choice too. The money is Lee’s either way, and it never expires.

What you’ll learn

1. Three tax breaks in one account

   Money goes into an HSA before tax, or you deduct it. It can be invested and grow tax-free. It comes out tax-free for qualified medical costs. No other account gets all three federal breaks. This year’s limits: $4,400 for self-only coverage, $8,750 for family.

2. Who can have one

   You need an HSA-eligible health plan, which has a higher deductible (the fact card says which plans qualify), and no other general health coverage. A spouse’s general health FSA that covers you counts as other coverage and blocks you from adding money.

3. Yours to keep, with a receipts trick

   HSA money rolls over every year and stays yours if you change jobs. You can pay a medical bill out of pocket, keep the receipt and pay yourself back tax-free years later. Only costs from after you opened the HSA count.

4. When spending it now is right

   If you have ongoing medical costs or no emergency fund yet, using the HSA now is a smart choice. Money taken out for non-medical costs owes income tax, plus a penalty before a set age (see the card). A few states, like California and New Jersey, tax HSA money.

Key words

HSA

a health savings account you own and use for medical costs

Also called: health savings account

HSA-eligible plan

a health plan with a higher deductible that lets you have an HSA

Also called: high-deductible health plan (HDHP)

qualified medical expense

a health cost the IRS lets you pay from an HSA tax-free

invested HSA

HSA money put into investments so it can grow over time

Common questions

What happens to my HSA when I start Medicare?

You can keep using the money for medical costs, but you can’t add more once Medicare starts. The Medicare lessons in Life After Paychecks explain how it works.

Is an HSA the same as an FSA?

No. An FSA is through your job and leftover money can be lost each year. An HSA is yours to keep and rolls over.

Remember this

If you can, fund it, invest it, keep the receipts.

Try it: Add your HSA

1. If you have an HSA, write down its balance and where it’s held.
2. Check this year’s limits on the fact cards.
3. Start a folder for medical receipts.

No account needed: do it on paper, or list your accounts in the free Net Worth Calculator.

Live facts

Numbers that change over time, with when they were last checked and where they come from.

• HSA limit, self-only coverage

  $4,400

  Yearly HSA limit with self-only high-deductible coverage

  As of 2026

  Source: IRS.gov(opens in a new tab)

• HSA limit, family coverage

  $8,750

  Yearly HSA limit with family high-deductible coverage

  As of 2026

  Source: IRS.gov(opens in a new tab)

• HSA catch-up at 55+

  $1,000

  Extra HSA room for people aged 55 or older

  As of 2026

  Source: IRS.gov(opens in a new tab)

• HSA rules, including non-medical withdrawals

  Source: IRS.gov (Publication 969)(opens in a new tab)

• Which health plans are HSA-eligible

  Source: HealthCare.gov(opens in a new tab)