Whether you rarely get sick or see a doctor for regular visits, health savings accounts (HSAs) are a smart way to pay for medical expenses — and save on your taxes. Here are a few key questions to help determine if an HSA is right for you.
- What's an HSA? An HSA is a savings account that allows you to save money tax-free to cover qualified medical expenses and is used in conjunction with a high-deductible health insurance policy.
- Do I qualify? To qualify for an HSA, you must have a high-deductible health plan (HDHP). For 2025, the IRS defines an HDHP as a plan with a deductible of at least $1,650 for an individual or $3,300 for a family. The 2025 annual deductible and out-of-pocket maximum for an HDHP cannot exceed $8,300 for an individual or $16,600 for a family. If you have a plan that meets these requirements, you may be eligible to open an HSA.
- What can I spend the money on? You can generally use HSA funds for IRS-qualified medical expenses. See note 1 These include deductibles, copayments, and other out-of-pocket costs. If you're younger than 65 and you use the money for nonmedical purposes, you'll be taxed and pay a penalty. Qualified medical expenses can include doctor visits, prescriptions, dental care, and vision care.
- How much can I contribute to an HSA? For 2025, the maximum contribution limit is $4,300 for individuals and $8,550 for families. Those 55 and over are also allowed an additional $1,000 catch-up contribution. The contribution limits may change each year, so it's important to check with the IRS to ensure you're aware of the maximum amount you're allowed to contribute.
- Does the money roll over? Yes. The money in your HSA can roll over from year to year. Unlike a flexible spending account (FSA), which has a use-it-or-lose-it policy, the money in your HSA will not expire at the end of the year. This means you can continue to save and invest the money in your HSA and use it to pay for qualified medical expenses in the future.
- How does an HSA grow with me over time? If you switch jobs or health care providers, you retain the money in your HSA account. Many HSA providers offer investment options, allowing growth over time through interest, dividends, and capital gains. If you manage your HSA funds wisely, you can potentially use this compounding growth to build a significant nest egg for future medical expenses. When you reach Medicare age, you can use your existing HSA account to pay medical expenses, including long-term care insurance, home health care and even some Medicare expenses.