Health Savings Account (HSA) Premiums, Taxes, and More

Understanding how to use

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Using a health savings account (HSA) to supplement your current health insurance coverage is a great way to save money on your health care costs. Along with saving money on your health care costs, your HSA can get your money working for you by earning interest and providing tax benefits.

Learn more details about the tax implications, deductibles, and contribution limits of HSAs.

Key Takeaways

  • A health savings account (HSA) is a tax-free account that can be used for health care costs, including copays, deductibles, and prescription medications.
  • To qualify for an HSA, you need to be enrolled in a high-deductible health insurance plan, which usually has a lower monthly premium.
  • The contribution limits to HSAs are usually revised every year.
  • You can invest the funds in your HSA, similar to how you'd invest in a 401(k).

How To Open an HSA

First, you have to have a qualifying health insurance plan. A qualifying health insurance plan is one that carries a high deductible. If you think you have a high-deductible health insurance plan (HDHP), then you can contact your employer, health insurance company, or a number of privately insured banks and credit unions locally or online to find out about setting up an HSA.

A high-deductible health plan may sound scary, but the limits for a health plan to qualify as a "high deductible plan" are not so bad considering the savings on premium payments and the tax advantages.

For example, to qualify for a high-deductible health plan in 2022, the minimum deductible is $1,400 for individual coverage or $2,800 for a family plan. This will increase to $1,500 and $3,000 in 2023. Each plan will be different, so ask about your options.


Consider that if you build up your savings in your HSA, you may save up enough to cover your deductibles for an HDHP fairly quickly.

Current HSA Contribution Limits

The IRS adjusts the limits each year for inflation. The HSA limits are:

  • A single person can contribute up to $3,850 per year in 2023, up from $3,650 in 2022
  • A family can contribute up to $7,750 per year in 2023, up from $7,300 in 2022

Tax Implications of HSAs

The money that goes into your HSA account is tax-free once your employer sets up paycheck deductions for you.

If you are not having your employer take payroll deductions for your HSA contributions, you will be able to take a tax deduction for the money you contributed when you prepare your federal income taxes.


There is no additional tax on non-medical distributions made after the date you become disabled, reach age 65, or pass away. However, you are still subject to income tax.

What Expenses Are Covered by an HSA?

Qualifying Expenses

There are many things that you can use your money for, but they may vary by plan, so when you get an HSA plan, you will need to ask for a list of covered expenses. Here are some examples of common HSA-qualifying expenses:

  • Prescription medicines and eyeglasses
  • Office visit co-pays
  • Chiropractors
  • Dentists
  • Orthodontists
  • Over-the-counter meds such as aspirin and antacids
  • Birth control (over-the-counter or prescription)
  • Laser eye surgery


The funds within your health savings account can be invested in a way that is similar to a 401K. By investing in your HSA, you can take advantage of tax-free growth and also embrace powerful tax advantages you can’t find through other traditional investment or savings vehicles.

An HSA offers flexibility in that you can make pre-tax contributions, grow tax-free earnings, and enjoy tax-free distributions for qualified medical expenses. In most cases, investing in an HSA can provide the potential for long-term growth and significant tax savings. However, investing in both a 401(k) and an HSA can be an extremely effective retirement planning strategy.

Health Insurance Premiums

You can use your HSA money to pay for your health insurance premiums while you are collecting federal or state unemployment benefits. You can also use your HSA money to pay for COBRA premiums, qualified long-term care insurance, and, if you are age 65 or older, Medicare and other health coverage (excluding Medigap).

International Medical Care

Your HSA money can be used for the same medical expenses anywhere and in another country. This is an added benefit of HSAs, as regular health plans may not cover medical care in a different country.

Frequently Asked Questions (FAQs)

If I switch jobs will I lose the money in my HSA?

No. The health savings account is yours. Whatever money you contribute to your HSA, you keep just as you would in a savings account. Even if you don't use all your HSA money in one given year, the money will just roll over to the next year for use.

What happens to my HSA if I lose my health insurance?

Once you have money in your HSA, you can continue to use it even if you do not have a high-deductible health insurance plan anymore, but you cannot keep contributing money to your health savings account.

When I die, can someone receive the funds in my HSA?

Yes, similar to a 401(k) or other retirement accounts, your named beneficiary will receive your health savings account money.

Updated by Jess Feldman
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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. IRS. "Rev. Proc. 2021-25."

  2. IRS. "Rev. Proc. 2022-24."

  3. IRS. "Rev. Proc. 2021-25," Page 1.

  4. IRS. "Rev. Proc. 2022-24," Page 1.

  5. IRS. "Publication 969 (2021), Health Savings Accounts and Other Tax-Favored Health Plans."

  6. IRS. "Publication 502 (2021), Medical and Dental Expenses."

  7. U.S. Securities and Exchange Commission. "Investor Bulletin: Health Savings Accounts (HSAs)."

  8. United States Office of Personnel Management. "FAQs for High Deductible Health Plans, HSA, and HRA."

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