If you have a high-deductible health plan (HDHP), a Health Savings Account (HSA) can be a powerful tax reduction tool and a way to build a fund for medical expenses. Here’s what you need to know for 2026.
Who Qualifies?
To contribute to an HSA, you must have an HSA-qualified HDHP. For 2026, the IRS defines these plans as having:
- Minimum deductible:
- Individual: $1,700
- Family: $3,400
- Out-of-pocket maximum (cannot exceed):
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- Individual: $8,500
- Family: $17,000
HDHPs can cover preventive care before you meet the deductible.
Why HSAs Are So Attractive
HSAs offer triple tax advantages:
- Tax-free contributions
- Contributions made through your paycheck avoid federal income and FICA taxes.
- Direct contributions (not made through a paycheck) are a federal income tax deduction even if you don’t itemize.
- Tax-free growth
- Interest and investment earnings inside your HSA grow tax-free.
- Tax-free withdrawals
- Qualified medical expense withdrawals—including vision and dental—are tax-free.
2026 Contribution Limits
- Individual: $4,400
- Family: $8,750
- Catch-up (age 55+): $1,000
(Employer contributions count toward these limits.)
Example : In 2026, Joe, age 56, with family coverage, contributes $9,750 (including catch-up). At a 22% marginal tax rate, he could save up to $2,145 in federal income taxes, plus an additional $746 in FICA taxes if contributes via payroll.
Other Key Rules
- You cannot contribute if you have other health coverage, including Medicare.
- You can keep your HSA and use it for qualified expenses even after enrolling in Medicare.
- Qualified expenses do not include most types of health insurance coverage premiums. (See exceptions below)
- Qualified expenses do include:
- COBRA premiums.
- Long-term care insurance (up to annual limits).
- Medicare Part A, B, C, & D premiums.
- Health care coverage while receiving unemployment compensation under federal or state law.
- Non-qualified withdrawals are taxed as income plus a 20% penalty (penalty waived after age 65, but income tax still applies).
Why Consider an HSA?
Balances roll over year to year, making HSAs a powerful way to build a retirement healthcare fund. Combined with tax advantages, they’re one of the most tax efficient medical savings tools available.
Learn more:
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