If you’re eligible to contribute to a Health Savings Account (HSA), consider taking a closer look at your contribution strategy. You may be able to reduce your 2026 taxes while strengthening your long-term financial security. Although many people use HSAs to pay current medical expenses, they can also help fund retirement.
Maximize Tax Savings
HSAs offer valuable tax advantages. Generally, contributions are pre-tax if made through payroll deductions or tax-deductible (without itemizing) if made directly to an HSA you establish yourself. Investment earnings grow tax-deferred, and withdrawals used for qualified medical expenses are tax-free.
If you haven’t reached the 2026 HSA contribution limit, there’s still time to contribute. HSA contributions for 2026 can be made until the unextended due date of your 2026 tax return, generally April 15, 2027.
For 2026, you can contribute up to $4,400 for self-only coverage or $8,750 for family coverage, plus an additional $1,000 catch-up contribution if you’re age 55 or older.
To be eligible to contribute, you generally must be covered by a qualifying high-deductible health plan (HDHP) and not be enrolled in Medicare or covered by certain other health plans.
For 2026, an HDHP generally must have a minimum deductible of $1,700 for self-only coverage ($3,400 for family coverage) and maximum annual out-of-pocket expenses of $8,500 ($17,000 for family coverage).
Beginning in 2026, HSA eligibility has expanded by generally treating bronze and catastrophic plans as HDHPs
OBBBA also made the telehealth safe harbor permanent (a plan may cover telehealth pre-deductible without disqualifying HSA eligibility), and beginning in 2026, a direct primary care arrangement no longer blocks HSA eligibility if fees stay within the monthly limit.
Think Beyond Medical Expenses
An HSA can do more than help pay today’s health care costs. If your financial situation allows, consider paying current qualified medical expenses out of pocket and leaving your HSA balance invested. Unused funds carry forward indefinitely and can continue growing on a tax-advantaged basis.
This strategy may also help build additional tax-advantaged retirement resources. For federal tax purposes, HSA earnings are not included in income while held, and distributions used for qualified medical expenses are tax-free.
After age 65, you may withdraw HSA funds for nonmedical expenses without the 20% penalty that generally applies to earlier nonqualified withdrawals, though you’ll owe regular income tax on those distributions. Withdrawals used for qualified medical expenses remain tax-free, so tax-free HSA funds may be used to pay certain Medicare premiums and other eligible health care expenses during retirement.
HSAs offer a triple tax advantage: contributions may be deductible or excludable, earnings grow tax-free, and qualified medical distributions are tax-free. Nonqualified distributions are generally taxable, and after age 65, the additional 20% tax no longer applies. State tax treatment may differ. Keep receipts for unreimbursed qualified medical expenses incurred after the HSA was established, as there is no deadline to reimburse yourself for eligible expenses.
Don’t Wait
Now is a good time to review whether you’re making the most of your HSA. Contact our office for assistance.