A health savings account (HSA) is a tax-advantaged savings account for medical costs, available to people covered by an HSA-eligible health plan. Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. The money is yours, rolls over every year and stays with you if you change jobs or plans.
Updated October 2026 for the 2027 plan year
Key facts (2027 plan year)
- 2027 HSA contribution limits: $4,500 for self-only coverage and $9,000 for family coverage (IRS Rev. Proc. 2026-24).
- 2026 HSA contribution limits: $4,400 self-only and $8,750 family (IRS Rev. Proc. 2025-19).
- People 55 or older can contribute an extra $1,000 a year as a catch-up contribution (IRS Publication 969).
- Since January 1, 2026, Bronze and Catastrophic plans count as HSA-compatible, even if they don’t meet the usual high-deductible plan test (IRS Notice 2026-05).
- For 2027, a high-deductible health plan needs a deductible of at least $1,750 (self-only) or $3,500 (family) and an out-of-pocket limit no higher than $8,700 or $17,400 (Rev. Proc. 2026-24).
- You can’t contribute to an HSA once you are enrolled in Medicare (IRS Publication 969).
What is an HSA?
An HSA is a personal savings account you use for health care costs, with three tax breaks built in. You can only open or add to one while you are covered by an HSA-eligible health plan. The account belongs to you, not your employer or insurer. Most people first ask what is an HSA when one shows up with a Bronze plan or in a benefits packet at work.
The three tax breaks, as described in IRS Publication 969, are:
- Money in is tax-deductible, or pre-tax if it comes through payroll.
- Growth is tax-free, including interest and investment earnings.
- Money out is tax-free when you spend it on qualified medical expenses.
HealthCare.gov describes an HSA as a way to pay for health care with pre-tax money, paired with a high-deductible plan (HealthCare.gov glossary). It works alongside your health plan, not instead of it. Your plan still has its deductible and out-of-pocket maximum; the HSA is how you pay your share with tax-free dollars.
How does an HSA work?
You, your employer or anyone else can put money into your HSA, up to a yearly IRS limit. When you get care, you pay from the account with an HSA debit card or reimburse yourself later. Whatever you don’t spend stays in the account and carries over to the next year.
There is no “use it or lose it” rule. Many people leave money in the account for years and invest it, much like a retirement account. You can contribute for a given year up to your tax-filing deadline the following spring.
If you use HSA money for something that isn’t a qualified medical expense, it counts as taxable income. You also pay an additional 20% tax, unless you are 65 or older, disabled, or the withdrawal happens after death. After 65, non-medical withdrawals are taxed like regular income, with no penalty. You report HSA activity on IRS Form 8889.
Who is eligible for an HSA?
To contribute to an HSA, you must be covered by an HSA-eligible health plan on the first day of the month. You also can’t have other disqualifying health coverage, can’t be enrolled in Medicare, and can’t be claimed as a dependent on someone else’s tax return (IRS Publication 969).
“Other coverage” is where people slip up. A spouse’s regular health plan that also covers you, or a general-purpose FSA, can make you ineligible. Dental, vision and some limited coverage don’t count against you.
Medicare is the other big trap. Once you enroll in any part of Medicare, you can no longer put money into an HSA, though you can keep spending what you saved. If you are nearing 65, see Medicaid vs Medicare for how Medicare enrollment works.
Are Bronze and Catastrophic plans HSA-eligible now?
Yes, since January 1, 2026. A 2025 federal law made Bronze and Catastrophic plans HSA-compatible even when they don’t meet the usual high-deductible health plan (HDHP) definition. The IRS explained the change in Notice 2026-05, released December 9, 2025.
That notice also says the plans don’t have to be bought through an Exchange to qualify. Before 2026, only some Bronze plans met the HDHP test, and Catastrophic plans generally didn’t because their out-of-pocket limits were too high.
For shoppers this is a big shift. If you choose a Bronze plan on the Marketplace for 2027, you can generally pair it with an HSA. Catastrophic plans are for people under 30 or with a hardship exemption. The same IRS notice also lets people in certain direct primary care arrangements contribute to an HSA, and it made pre-deductible telehealth coverage permanently compatible with HSAs.
Silver, Gold and Platinum plans still need to meet the regular HDHP rules to be HSA-eligible. Many don’t. Check the plan’s details, or ask Honesty to filter for HSA-eligible plans.
HSA contribution limits for 2026 and 2027
The IRS sets HSA limits each year. For 2027, you can contribute up to $4,500 with self-only coverage or $9,000 with family coverage. The 55-and-older catch-up stays at $1,000.
| Limit | 2026 | 2027 |
|---|---|---|
| HSA contribution, self-only | $4,400 | $4,500 |
| HSA contribution, family | $8,750 | $9,000 |
| Catch-up contribution (age 55+) | $1,000 | $1,000 |
| HDHP minimum deductible, self-only / family | $1,700 / $3,400 | $1,750 / $3,500 |
| HDHP out-of-pocket limit, self-only / family | $8,500 / $17,000 | $8,700 / $17,400 |
Sources: Rev. Proc. 2025-19 (2026) and Rev. Proc. 2026-24 (2027). The limit covers all money going in, including employer contributions.
The HDHP numbers apply to plans that qualify the regular way. Bronze and Catastrophic plans qualify by law, even though the ACA allows their out-of-pocket maximum to reach $12,000 for one person in 2027.
Honesty.AI compares 2027 plans, checks your subsidy and flags HSA-eligible options.
What can you pay for with an HSA?
You can use HSA money tax-free for qualified medical expenses for you, your spouse and your tax dependents. That includes deductibles, copays and coinsurance, prescriptions, dental and vision care, and many medical supplies.
Health insurance premiums usually don’t qualify. IRS Publication 969 lists exceptions, including COBRA premiums, health coverage while you receive unemployment compensation, qualified long-term care insurance, and Medicare premiums once you are 65 or older.
Keep receipts. You don’t send them to the IRS, but you may need them to show that a withdrawal paid for a qualified expense.
HSA vs FSA: what’s the difference?
The most common follow-up to “what is an HSA?” is how it differs from an FSA. An HSA is an account you own that rolls over and goes with you. A health flexible spending account (FSA) is an employer benefit that is mostly use-it-or-lose-it and stays with the job. Both let you pay medical costs with pre-tax money.
The biggest practical difference is ownership. If you leave a job, your HSA comes with you. An FSA generally ends with the job, and unspent money can be lost (HealthCare.gov FSA glossary).
| Feature | HSA | Health FSA |
|---|---|---|
| Who owns it | You | Your employer’s plan |
| Needs a specific health plan? | Yes: HSA-eligible plan (HDHP, Bronze or Catastrophic) | No; offered through an employer |
| Who can open one | Anyone eligible, including self-employed and Marketplace enrollees | Employees whose employer offers it |
| Contribution limit | $4,400 self-only / $8,750 family (2026); $4,500 / $9,000 (2027) | $3,400 per employee (2026); 2027 limit not yet announced |
| Unused money | Rolls over every year | Use it or lose it, unless the plan allows a carryover (up to $680 for 2026) or a grace period |
| Can you invest it? | Often, depending on the HSA provider | No |
| Change contributions mid-year? | Yes | Usually only with a qualifying life event |
| If you leave your job | The account stays with you | Generally ends with the job |
The 2026 FSA figures come from IRS Rev. Proc. 2025-32. As of mid-October 2026, the IRS had not yet published the 2027 FSA limit.
Can you have both? Usually not a general-purpose FSA, because it makes you ineligible for an HSA. Many employers offer a limited-purpose FSA for dental and vision costs, which you can use alongside an HSA.
Is an HSA worth it?
An HSA is usually worth it if you are eligible and can set money aside, because no other account gives a tax break on the way in, while it grows and on the way out. It works best for people who are fairly healthy, can handle a higher deductible, or want to save for future medical costs.
It is less helpful if you can’t afford to put money in, or if a higher deductible would stop you from getting care you need. In those cases, a Silver plan with cost-sharing reductions may protect you better. If your income is under 250% of the poverty level, compare carefully before you choose a Bronze plan.
For self-employed people, an HSA pairs well with a Marketplace Bronze plan. See health insurance for self-employed workers and our plan-choosing guide. Your premium tax credit for 2027 still depends on income; see 2027 subsidies.
Find a 2027 plan that works with an HSA
Honesty®, a licensed AI insurance agent from Honesty® Insurance Services, LLC (NPN 21094885), compares ACA, alternative and ancillary plans for your family’s needs, applies your subsidy and explains which plans pair with an HSA. It works for you, not the carriers. Chat, voice or text, 24/7.
Hospital indemnity, accident, dental and vision coverage won’t block your HSA contributions; see our guide to supplemental health insurance for how each type pays.
Frequently asked questions
What is an HSA in simple terms?
An HSA is a savings account for medical costs that you can use when you have an HSA-eligible health plan. Money goes in tax-free, grows tax-free and comes out tax-free for qualified medical expenses, and it rolls over every year.
What is the HSA contribution limit for 2027?
For 2027, the IRS limit is $4,500 for self-only coverage and $9,000 for family coverage. People 55 or older can add a $1,000 catch-up contribution.
Can I have an HSA with a Marketplace Bronze plan?
Yes. Since January 1, 2026, Bronze and Catastrophic plans count as HSA-compatible under federal law, as explained in IRS Notice 2026-05.
What is the difference between an HSA vs FSA?
You own an HSA, it rolls over every year and it stays with you. A health FSA is an employer benefit that is mostly use-it-or-lose-it and generally ends when you leave the job. An HSA requires an HSA-eligible health plan; an FSA does not.
Can I contribute to an HSA after I enroll in Medicare?
No. Once you are enrolled in Medicare, you can no longer contribute to an HSA. You can still use the money already in the account for qualified medical expenses.
What happens to my HSA if I change jobs or plans?
The money stays yours. You can keep using it for qualified medical expenses, but you can only add new money while you are covered by an HSA-eligible plan.
You can keep contributing to an HSA if you also carry critical illness insurance for a specific disease or illness.
You can pay many dental bills with HSA money; see how dental insurance annual maximums and waiting periods work before you rely on a plan.
Eye exams, eyeglasses and contact lenses are qualified medical expenses; compare that with vision insurance to decide how to pay for routine eye care.
Keep learning: deductible vs out-of-pocket maximum, Bronze vs Silver vs Gold vs Platinum, how health insurance works and how Honesty.AI works.
