Health Savings Account (HSA)
Updated for plan year 2026
In plain terms
A Health Savings Account (HSA) is a tax-advantaged account you use to pay for qualified medical expenses, available only if you're enrolled in an HSA-qualified high-deductible health plan. It carries a rare triple tax advantage: contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified expenses are tax-free. The account is yours and the balance rolls over year to year, so it doesn't disappear if you change jobs or plans. The IRS sets the annual contribution limits, which are adjusted each year.
A plain example
You're on an HSA-qualified HDHP and put pre-tax money into your HSA from each paycheck. In March you pay a $400 lab bill straight from the account, tax-free. The dollars you don't spend stay invested and roll into next year, so an unused balance becomes long-term savings rather than a year-end scramble to spend it.
Why it matters
An HSA turns out-of-pocket spending into a tax break and a savings vehicle at once, which can offset the higher deductible an HDHP requires. Because the balance is yours for life, it's one of the few health-care accounts that can double as a retirement cushion for future medical costs.
A common point of confusion
An HSA is not the same as an FSA. The HSA is yours to keep and pairs only with a qualified high-deductible plan; an FSA is employer-owned and generally forfeited if unspent. Putting money in an HSA without a qualifying HDHP triggers an IRS penalty.