Health Savings Accounts Help You Save Money

Medically Reviewed by Sarah Goodell on September 14, 2022

If you have a high-deductible health plan (HDHP), you might also want to have a health savings account (HSA). This is an investment account that grows tax-free over the years. You put money in the account before you have to pay any taxes on it. You don't pay a tax when you spend it, either, as long as you spend HSA money on qualified health expenses -- health care or products on an IRS-approved list.

HSAs must be paired with a qualified HDHP.

What You Can Use the Savings For

You can use the money deposited in a health savings account for many different medical goods and services, including:

You can also put aside money for dental work or vision care expenses.

You can now use your HSA for over-the-counter medicines and even feminie hygiene products.

Requirements: You can only get an HSA if you're enrolled in an HDHP. For 2022, the plan must have at least a deductible of $1,400 a year for one person and $2,800 for a family.

Amount you can save a year: In 2022, you can put up to $3,650 in your HSA if you're single. If you have insurance for your family, you can put in up to $7,100 for a family. If you're over age 55, you can put in $1,000 more each year. Your employer can contribute to an HSA account for you. However, your combined contributions can't exceed the maximum amount allowed in a given year.

Benefits: You don't have to spend the money you deposit into an HSA the same year it was deposited. It carries over from year to year, and the money grows tax-free.

Like a 401k account, you can take your HSA with you if you change jobs.

You can have an HSA and a dependent care flexible spending account (FSA). But you are not eligible for an HSA if you have an FSA account that allows you to use it to pay for medical expenses.

Warnings: You need to report your HSA on your federal tax return. However, you can claim the money you’ve deposited into the account as a tax deduction and subtract it from your gross income. If you use it for anything except medical expenses, you will have to pay tax on it, plus a 20% penalty.

Show Sources

SOURCES: "Flexible Spending Account Changes."

Internal Revenue Service: "Publication 969 (2012), Health Savings Accounts and Other Tax-Favored Health Plans" and Internal Revenue Service Bulletin: 2015-20, May 18, 2015. 

FAIR Health, Inc.: "A New Look At Flexible Spending Plans."

Purdue University: "2013 Dependent Care Flexible Spending Account (FSA)."

Society for Human Resource Management: "IRS Sets 2017 HSA Contribution Limits." 

Congressional Research Service: "Flexible Spending Accounts."

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