A Health Savings Account (HSA) is for those with high-deductible health plans (HDHP) that help individuals save for medical expenses that primary plans don't cover. An HSA can cover copays, prescriptions, dental care, contacts, and glasses.

While it may sound complicated, the benefits are clear once you know how to contribute and withdraw from an HSA.

Must-knows about HSAs

Eligibility

• You must be covered by an HDHP on the first day of the month.
• Cannot be enrolled in Medicare or another health plan.
• You're not claimed as a dependent on someone else's tax return.
• Prohibited from having additional coverage, including a flexible spending account (FSA) or a Health Reimbursement Account.

Eligible HSA expenses

• general doctor visits
• prescription drugs
• hospital stays
• dental care
• vision care
• acupuncture
• mental health services
• hearing aid

Contribution limits

You can contribute to an HSA if you are an eligible individual, an employee whose employer may also contribute, or if you are self-employed or unemployed.

Several factors determine the maximum annual Health Savings Account (HSA) contribution.

• Is the coverage for you or a family member?
• Are you 55 or over?
• How much does your employer contribute to your HSA?

Contribution limits for 2025:

• Self-only coverage: $4,300
• Family coverage: $8,550
• Catch-up contribution: An additional $1,000 for those age 55 or older

You can calculate your personal contribution limit with a bit of math.

1. Find the total annual contribution limit for your coverage type
2. Divide that amount by 12
3. Multiply the result by the number of months you qualify for that year.

The IRS allows you to contribute to your HSA up to the tax filing date (April 15). Contributions do roll over from year to year.

Tax advantages

• Tax-deductible deposits. HSA contributions are tax-deductible or pre-tax. It lowers overall taxable income.
• Tax-deferred growth. The interest you earn on the HSA is tax-deferred. It means that the funds grow without being subject to taxes.
• Tax-free withdrawals. Any withdrawal you make is tax-free for approved medical expenses, including deductibles, copays, prescriptions, vision, and dental care.
• No time limit on an HSA. You can use the money for eligible health care expenses throughout your life - even in retirement.
• Portability. Your health savings account will go with you if you change health plans or jobs or decide to retire.

Only cash contributions are allowed for HSAs. Stock and property are not permitted as contributions.

You can visit the Internal Revenue Service (IRS) website for more information about Health Savings Accounts.

How to contribute to an HSA

• Payroll deductions: Automatic deductions from your paycheck are the most common way contributions are made.
• Direct deposit: You have the option of making contributions directly to your HSA using your bank or financial institution

How to withdraw from an HSA

• You can just use your HSA debit card to submit a claim form to pay for eligible medical expenses.
• Important considerations:
• Verification of expenses: Keep receipts for the covered medical expenses in case of an audit.
• Non-qualified withdrawals: You will owe income tax on the amount you withdrew on top of a penalty if you're under 65.

Tracking HSA funds

Online account. The vast majority of HSA providers give individuals account access online, where they can view the balance, transaction history, and investment options.

Statements. Health Savings Accounts provide regular statements detailing contributions, withdrawals, and account balances.