A Health Savings Account is a tax-advantaged savings account tied to a high-deductible health insurance plan

A Health Savings Account (HSA) is a bank account you own that holds money specifically for medical expenses. Unlike a regular savings account, the money you put in is not taxed, the money that grows inside it is not taxed, and the money you withdraw for medical costs is not taxed. You must be enrolled in a high-deductible health plan (HDHP) to open one, but once you have the account, it stays yours even if you change jobs or insurance plans.

The account works like this: you contribute money from your paycheck (if your employer offers it) or directly from your bank account. That money sits in the account until you need it. When you have a medical expense—a doctor visit, prescription, dental work, vision care—you can withdraw from your HSA to pay for it. You keep receipts and records, but you do not have to submit them to anyone unless you are audited by the IRS.

Key Takeaways

  • You can only open an HSA if you are enrolled in a high-deductible health plan; the account is separate from your insurance but linked to it.
  • Money you contribute is not taxed, money inside the account grows tax-free, and withdrawals for medical expenses are not taxed—a triple tax advantage no other savings account offers.
  • You can withdraw money for a wide range of medical costs: doctor visits, prescriptions, dental, vision, mental health, and some medical equipment and supplies.
  • Any money you do not spend stays in the account and rolls over year to year; there is no "use it or lose it" deadline like some other health plans have.
  • After age 65, you can withdraw money for any reason without penalty, though non-medical withdrawals are taxed as income.

Who can open an HSA and what the income limits are

To open an HSA, you must meet three conditions: you must be enrolled in a high-deductible health plan, you cannot be covered by any other health insurance (with limited exceptions for accident, disability, or dental-only plans), and you cannot be claimed as a dependent on someone else's tax return.

There are no income limits to open an HSA. Anyone with an HDHP can open one, regardless of how much money they make. However, the amount you can contribute each year does have a limit set by the IRS, and that limit changes annually. For 2024, the limit is $4,150 if you have individual coverage or $8,300 if you have family coverage. If you are 55 or older, you can contribute an additional $1,000 per year. These limits apply to all your HSAs combined—if you have more than one account, the total across all of them cannot exceed the annual limit.

What medical expenses you can pay for with HSA money

The IRS maintains a list of approved medical expenses, and it is broader than many people expect. You can use HSA money for doctor visits, hospital stays, surgery, prescription medications, and mental health counseling. You can also pay for dental work (cleanings, fillings, root canals, orthodontics), vision care (eye exams, glasses, contact lenses, LASIK surgery), and hearing aids.

Less obvious expenses also may have access to: over-the-counter medications (including pain relievers, cold medicine, and allergy medication), medical equipment (crutches, wheelchairs, blood pressure monitors, glucose meters), physical therapy, chiropractic care, and acupuncture. You can even use HSA money to pay your health insurance premiums in certain situations—specifically COBRA premiums, premiums while you are unemployed and receiving unemployment benefits, and Medicare premiums after age 65.

Expenses that do not may have access to include cosmetic procedures (unless medically necessary), gym memberships, vitamins and supplements (unless prescribed by a doctor for a specific condition), and over-the-counter items like toothpaste or sunscreen. If you are unsure whether a specific expense qualifies, the IRS publishes a full list online, and your HSA provider can also answer questions.

How contributions work and where the money comes from

You can contribute to an HSA in three ways. If your employer offers an HSA, you can have money deducted from your paycheck before taxes are taken out—this is the most common route and saves you the most money because the contribution reduces your taxable income. You can also contribute directly from your personal bank account, though you will need to claim the deduction on your tax return. A third option is to receive a contribution from your employer as part of your benefits package; some employers contribute money to their employees' HSAs as a form of compensation.

You can contribute at any time during the year, but there is a deadline: you have until April 15 of the following year to make contributions that count toward the previous year's limit. For example, contributions made between January 1 and April 15, 2025 can count toward either the 2024 or 2025 limit, depending on which year you designate them for. If you contribute more than the annual limit, you will owe taxes and a 20 percent penalty on the excess amount.

How money grows in the account and what happens to unused funds

Your HSA is held by a bank or financial institution, and most HSA providers let you invest the money in mutual funds, stocks, or bonds—similar to how a 401(k) works. If you keep the money in a regular savings account within the HSA, it earns interest at whatever rate the bank offers. Any growth or interest earned inside the account is not taxed, which is a significant advantage over a regular savings account.

Unlike some health plans that have a "use it or lose it" rule, HSA money does not disappear at the end of the year. Any balance you do not spend rolls over automatically and stays in your account indefinitely. This means you can build up a large balance over time if you do not need to withdraw much. Some people use HSAs as a long-term retirement savings tool, contributing the maximum each year and only withdrawing for medical expenses when necessary, allowing the account to grow for decades.

What happens to your HSA if you change jobs or insurance

Your HSA belongs to you, not your employer or your insurance company. If you leave your job, the account stays open and the money stays yours. You can continue to use it to pay for medical expenses, and you can continue to contribute to it if you remain enrolled in an HDHP with another employer or if you purchase an HDHP on your own.

If you switch to a different health insurance plan that is not a high-deductible plan, you can no longer make new contributions to your HSA. However, you can still withdraw money from the account for medical expenses. The account itself does not close; it simply stops accepting contributions until you re-enroll in an HDHP. If you later switch back to an HDHP, you can resume contributions.

If you move your HSA to a different bank or provider, you can do a trustee-to-trustee transfer, which means the money moves directly from one institution to another without you touching it. This avoids any tax complications. You can also do a rollover, where you withdraw the money and deposit it into a new HSA within 60 days, though this method carries more risk if you miss the deadline.

Withdrawals after age 65 and using HSA money in retirement

At age 65, the rules change. You can withdraw money from your HSA for any reason without penalty—not just medical expenses. However, if you withdraw money for non-medical reasons, that withdrawal is taxed as ordinary income. Medical withdrawals remain tax-free at any age.

This flexibility makes HSAs useful as a retirement savings tool. If you have built up a large balance and do not need it for medical expenses, you can use it to pay for other living costs in retirement, though you will pay income tax on those withdrawals. Many people treat their HSA as a supplemental retirement account, contributing the maximum each year while working and letting it grow, then drawing from it in retirement for both medical and non-medical expenses.

Frequently Asked Questions

Can I use my HSA to pay for my spouse's medical expenses?

Yes, if your spouse is covered under your family HDHP. You can also use HSA money to pay for medical expenses of your spouse or dependents even if they are not covered by your plan, as long as you could claim them as dependents on your tax return. The expenses must still be may have access to medical expenses.

What happens to my HSA if I die?

The account passes to your beneficiary, usually your spouse or estate. If your spouse inherits it, they can treat it as their own HSA and continue using it tax-free for medical expenses. If someone else inherits it, the account is taxed as income to them, though they can still withdraw money for the deceased person's medical expenses without additional tax.

Can I withdraw money from my HSA before I meet my deductible?

Yes. There is no requirement that you meet your deductible before using HSA money. You can withdraw for any may have access to medical expense at any time, regardless of whether you have paid your deductible. The HSA and the deductible are separate—one is a savings account, the other is part of your insurance plan.

Do I need to submit receipts to my HSA provider when I withdraw money?

No. You do not need to submit receipts or get approval before withdrawing. You keep your own records and receipts. The IRS can ask to see them if you are audited, but day-to-day, the HSA provider does not require documentation. This is different from a Flexible Spending Account (FSA), which often requires you to submit receipts upfront.

Can I use my HSA debit card for anything, or only medical expenses?

Most HSA providers issue a debit card that is supposed to be used only for may have access to medical expenses. If you use it for a non-may have access to expense, you are responsible for withdrawing that money and repaying the account, or you will owe taxes and penalties. Some cards have controls that block non-medical merchants, but not all do, so it is your responsibility to track what you spend.