Health insurance premiums and medical bills can feel hard to control. One way to make these costs more manageable is through a health savings account, or HSA. It lets you save pretax dollars, then withdraw your money tax free to pay for health care.
Here’s what you need to know about eligibility, contributions and withdrawals.
Eligibility
You must have a qualified high-deductible health plan (HDHP) to open and contribute to an HSA. You can get your qualified plan through work or the health insurance marketplace, and you can open an HSA through your employer or on your own. You also won’t lose your account if you’re laid off or change jobs.
You’re not eligible for an HSA if you’re enrolled in Medicare or if someone can claim you as a dependent on their tax return.
Contributions
The most you can contribute in 2025 is $4,300 if your plan only covers you, and $8,550 if it covers you and a spouse or dependent. Taxpayers 55 and older can each contribute an extra $1,000.
Withdrawals
You don’t have to spend all your HSA funds each year. You can leave the money in your account indefinitely. You can also spend it in years when you don’t have a high-deductible plan.
If you withdraw the money for anything other than a qualified medical expense, you’ll owe income tax at your marginal rate. If you’re younger than 65, you’ll also owe a 20% penalty.
Long-Term Planning
Some people invest HSA contributions they won’t need to withdraw for at least 10 years. Why? An HSA is the only account with no taxes on contributions, no taxes on growth and no taxes on withdrawals used to pay qualified medical expenses—it’s a triple tax advantage.
Wondering how to open an HSA or have questions about how it works? Get in touch for assistance.