What is HSA?

An HSA is a tax-advantaged account for medical expenses. You contribute pre-tax dollars, the money grows tax-free, and withdrawals are tax-free for qualified health costs. Established under Section 223 of the Internal Revenue Code, HSAs offer a unique 'triple tax advantage': contributions are 100% tax-deductible (or pre-tax if made via payroll), account growth and investment earnings compound tax-free, and withdrawals are tax-free when used for qualified medical expenses.

Contribution limits are adjusted annually by the IRS. For the 2026 tax year, the contribution limit is $4,400 for self-only coverage and $8,750 for family coverage (up from $4,300 and $8,550 in 2025 respectively). Individuals aged 55 and older can make an additional catch-up contribution of $1,000. Unlike FSAs, HSA balances do not expire; unused funds roll over indefinitely and can be invested in mutual funds or ETFs.

HSAs also serve as a stealth retirement tool. Once the account owner reaches age 65, they can withdraw HSA funds for non-medical expenses without penalty, paying only ordinary income tax (similar to a traditional IRA), while qualified medical withdrawals remain 100% tax-free.