HSA (Health Savings Account)
A tax-advantaged account that lets you save pre-tax money for qualified medical expenses, available with high-deductible health plans.
Last reviewed August 23, 2026
Definition
A Health Savings Account (HSA) is a tax-advantaged savings account specifically designed to pay for qualified medical expenses. HSAs are available to people enrolled in high-deductible health plans (HDHPs) and offer a triple tax advantage that makes them one of the most powerful financial tools available.
The triple tax advantage:
1. Contributions are made pre-tax (or are tax-deductible if made directly)
2. Money grows tax-free through investments
3. Withdrawals are tax-free when used for qualified medical expenses
Unlike Flexible Spending Accounts (FSAs), HSA funds roll over year to year indefinitely. This means you can accumulate funds over time and use them for healthcare expenses in retirement, when medical costs are typically highest. After age 65, HSA funds can be used for any purpose (with regular income tax applying to non-medical withdrawals, similar to a traditional IRA).
For 2026 the HSA contribution limits are $4,400 for self-only coverage and $8,750 for family coverage, plus a $1,000 catch-up contribution if you're 55 or older and not enrolled in Medicare. Source: IRS Revenue Procedure 2025-19. These change annually, so check the year before relying on a figure.
An HSA and an FSA are often described interchangeably and behave very differently, particularly on whether the money is yours to keep. HSA vs. FSA works through where they diverge.
Examples
You enroll in your employer's high-deductible health plan and contribute the annual maximum to your HSA. You spend part of it on medical expenses during the year, and the remainder stays in the account.
You have $8,000 in your HSA from previous years. After age 65, you use it to pay Medicare Part B premiums (a qualified HSA expense) tax-free.
You pay for glasses, therapy sessions, and prescription medications from your HSA instead of your regular bank account. Because the money went in before tax, the effective discount is your own combined marginal rate.
Frequently asked questions
What qualifies as an HSA eligible expense?
Qualified HSA expenses include most medical, dental, and vision expenses: doctor visits, prescriptions, dental cleanings, glasses and contacts, mental health services, physical therapy, and many over-the-counter medications. The list also includes some less-obvious items like menstrual care products, sunscreen, and certain equipment.
What's the difference between an HSA and FSA?
The key differences: HSAs require enrollment in a high-deductible health plan; FSAs are available with most health plans. HSA funds roll over indefinitely; FSA funds are generally use-it-or-lose-it. HSAs can be invested and grow tax-free; FSAs typically cannot be invested.
Can I use my HSA for non-medical expenses?
Before age 65, non-medical withdrawals are subject to income tax plus a 20% penalty. After age 65, non-medical withdrawals are subject only to regular income tax, making the HSA function like a traditional IRA for retirement savings.
Related terms
Open enrollment
The annual period during which employees can enroll in, change, or cancel employer-sponsored benefits.
Deductible
The amount you pay out of pocket for covered services before your insurance begins to pay.
FSA (Flexible Spending Account)
A pre-tax account for healthcare expenses available with most employer-sponsored health plans, but funds typically must be used within the plan year.
HDHP (High-Deductible Health Plan)
A health insurance plan with lower premiums but a higher deductible than traditional plans, and the only plan type that makes you eligible for an HSA.
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