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What is a Health Savings Account?


A health savings account (HSA) is a tax-advantaged account available to taxpayers enrolled in a high-deductible health plan (HDHP). The funds contributed to an HSA are not subject to federal income tax. This helps individuals save for medical expenses while reducing their taxable income.

How does a High-Deductible Health Plan work?

An HDHP is often a less expensive alternative to traditional health insurance. Once you have met the deductible, the plan covers your medical expenses. However, you may have a co-pay under the plan until you pay the maximum out-of-pocket costs. After that, the plan pays 100% of your qualified expenses. Suppose you have questions about your HDHP and its coverage and deductible limits. In that case, you should speak with your employer or benefits provider.

Who can contribute to an HSA?

If a high-deductible health plan covers you, you may contribute to an HSA if you meet the following criteria:

  • You are not covered by any other health plan that is not an HDHP (except certain plans that provide specific limited types of coverage)
  • You are not enrolled in Medicare.
  • You are not eligible to be claimed as a dependent on another person's tax return.

What are the contribution limits?

For 2023, if you have self-only HDHP coverage, the maximum you can contribute to your HSA is $3,850. If you have family HDHP coverage, the most you can contribute is $7,750 for 2023.

  • If you are 55 or older, you can make "catch-up" contributions of an additional $1,000 each year to help you save even more money for medical expenses. Catch-up contributions must be made to the HSA of the spouse age 55 or older. If each spouse is age 55 or older and not enrolled in Medicare, then each spouse must make a catch-up contribution to his or her own HSA.
  • If you have family HDHP coverage, HSA contributions can be made either to one spouse's HSA or split between spouses' HSAs.
  • Rollovers from other HSAs are allowed and are not subject to contribution limits.

What are qualified medical expenses?

"Qualified medical expenses" are those paid for medical care not covered by insurance and incurred after you open your HSA. Such expenses include medical, dental, vision, chiropractic, and even acupuncture treatments. For an updated list of qualified medical expenses, visit or speak with a qualified tax expert.

Distributions used to pay for qualified medical expenses are tax-free and may be taken at any time. However, any portion of a distribution not used for a qualifying medical expense is taxable and may be subject to an additional 20% penalty tax. This penalty does not apply to distributions made after your death, while you are disabled, or after you reach age 65.

*Additional tax implications may apply. Please speak with a qualified tax expert for details and information.

Can I name a beneficiary?

Yes. Upon your death, if your spouse is your beneficiary, your HSA becomes their HSA. Tax is paid only on distributions taken for non-qualifying expenses. If your beneficiary is not your spouse, your HSA terminates when you die, and the assets become taxable income to your beneficiary.

PMC. (2018). Health Savings Accounts for High-Deductible Health Plans [Brochure]



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