HSA Calculator

The short answer

• You need a high-deductible health plan (HDHP) and no other health coverage to contribute.
• In 2026 you can put in $4,400 with self-only coverage or $8,750 with family coverage, plus $1,000 from age 55.
• A single filer earning $75,000 who contributes $4,400 through payroll saves about $1,305 of tax, so the $4,400 really costs $3,095.
• Invested at 6% a year from 40 to 65, $4,400 a year grows to about $247,973.

What an HSA is

A health savings account is a personal savings account for medical costs, held with a bank, credit union or investment firm acting as trustee. You own it, not your employer, and the money never expires. You can spend it on deductibles, copays, prescriptions, dental and vision care, or leave it to grow.

It is different from a flexible spending account (FSA), which your employer owns and which mostly resets each year. An HSA rolls over forever and moves with you from job to job and into retirement.

Who can open one

To contribute for a month, on the first day of that month you must:

• Be covered by a qualifying high-deductible health plan.
• Have no other health coverage that pays before the deductible (a spouse’s general-purpose FSA counts as other coverage; dental, vision and accident cover do not).
• Not be enrolled in Medicare.
• Not be claimed as a dependent on someone else’s tax return.

From 2026, bronze and catastrophic plans bought through a Health Insurance Marketplace also count as HDHPs, and a direct primary care membership no longer blocks you from contributing. Your plan documents or insurer will say whether the plan is "HSA-qualified".

2026 contribution limits

The IRS raises the base limits each year for inflation; the $1,000 catch-up is fixed by law. Married couples with family coverage share one family limit, which they can split however they like, but each spouse aged 55 or older must put their catch-up in an HSA in their own name. You have until the tax filing deadline, April 15, 2027, to make 2026 contributions.

The triple tax break

A 401(k) gives you a deduction going in but taxes withdrawals; a Roth IRA taxes money going in but not coming out. An HSA used for medical costs does neither, which is why many planners call it the best tax deal available.

A worked example

That is a saving of 29.7 cents on every dollar, before any investment growth. The same person living in New York would also save $238 of state tax, for a total of $1,542.

How the saving changes with income

The federal saving follows your top tax bracket: 12% at $45,000, 22% at $75,000, 24% at $150,000 and 32% at $250,000. The payroll saving works the other way: above the $184,500 Social Security wage base for 2026, you already pay no more Social Security tax, so only the Medicare part is saved. That is why the $250,000 earner saves just $103 of payroll tax against $337 for everyone below the wage base. Our tax bracket calculator shows which bracket your last dollar falls in.

State tax: California and New Jersey

Most states with an income tax follow the federal rules, so your contribution comes off state income too. California and New Jersey don’t: contributions are added back on the state return, and interest, dividends and gains inside the account are taxed by the state each year, so keep records of the account’s earnings for your state return. Residents there still get the full federal and payroll saving.

Payroll or direct contributions

Contributions taken from your paycheck through your employer’s cafeteria (Section 125) plan come out before income tax and before the 7.65% Social Security and Medicare tax. Money you deposit yourself is deducted on Form 8889 when you file, which saves income tax but not payroll tax.

In the example, contributing directly saves $968 instead of $1,305. If your employer offers payroll contributions, use them. Self-employed people can only contribute directly, and their HSA deduction doesn’t reduce self-employment tax.

Employer contributions

Many employers seed HSAs, often with $500 to $1,500a year, or match contributions. Employer money isn’t taxed as wages, isn’t subject to payroll tax and shows on your W-2 in box 12 with code W. It counts toward the limit, so it reduces how much you can put in yourself.

A married couple with family coverage earning $120,000 whose employer puts in $1,000 can add $7,750 of their own, which saves $930 of federal tax and $593 of payroll tax.

Part-year coverage and the last-month rule

If you are HSA-eligible for only part of the year, your limit is one-twelfth of the annual amount for each month you were eligible on the first day. Six months of self-only coverage allows $2,200.

Investing the balance

Over 25 years you put in $110,000. Invested at 6% and left alone, it grows to about $247,973, worth about $133,754in today’s dollars at 2.5% inflation. Paying $1,500 a year of medical costs from the account (rising with inflation) leaves about $140,647. Left in cash at 1%, the same deposits reach only $124,839. Starting at 30 instead of 40 lifts the invested balance at 65 to about $503,655. Our investment calculator shows how fees and returns change long-term growth.

The receipts strategy

There is no time limit on reimbursing yourself for a qualified medical expense, as long as it was incurred after you opened the HSA. So if you can afford it, you can pay medical bills from your checking account, keep the receipts, and let the HSA stay invested. Years later you can take out the total of those receipts tax-free, for any reason.

What you can spend it on

• Yes: deductibles, copays and coinsurance; prescriptions; dental and vision care, including glasses and contacts; mental health care; over-the-counter medicines and menstrual products; COBRA premiums; long-term care insurance premiums up to an age-based limit; Medicare premiums from 65 (not Medigap).
• No: regular health insurance premiums while you work, gym memberships, cosmetic procedures and general health items.

You can also spend it on your spouse’s and dependents’ qualified costs, even if they aren’t on your HDHP. IRS Publication 502 has the full list.

At 65 and Medicare

1. Before 65Non-medical withdrawals are taxed and pay a 20% additional tax.
2. 65The 20% penalty ends. Non-medical withdrawals are taxed as income, like a traditional IRA.
3. Medicare enrollmentNew contributions stop. Part A can be backdated up to six months if you enroll after 65, so stop contributing six months before you apply.
4. Any ageWithdrawals for qualified medical costs, including Medicare Part B, Part D and Medicare Advantage premiums, are tax-free.

Health costs in retirement are large, so many retirees never need to make a taxable withdrawal: the HSA simply pays Medicare premiums, dental work and prescriptions. Our retirement calculator helps size the rest of your savings.

HSA, 401(k) or IRA first?

A common order, if you have an HDHP:

1. Contribute enough to your 401(k) to get the full employer match.
2. Fill the HSA through payroll, since it saves payroll tax too.
3. Then add to a Roth IRA or more to the 401(k).

The HSA wins over a 401(k) for money you will spend on health care, because it is never taxed. It also saves Social Security and Medicare tax, which 401(k) deferrals do not.

HSA vs FSA

You can’t have a general-purpose FSA and contribute to an HSA, but a limited-purpose FSA for dental and vision costs works alongside one.

Is a high-deductible plan right for you?

HDHPs usually have lower premiums but higher costs when you need care. Compare the total: yearly premiums plus your likely out-of-pocket costs, minus any employer HSA money and the tax you save. If you are healthy and can cover the deductible from savings, an HDHP plus HSA often comes out ahead. If you expect large regular costs, a plan with a lower deductible may be cheaper overall, even without the HSA.

Common mistakes

• Leaving the whole balance in cash for decades.
• Forgetting that your employer’s contribution counts toward the limit, and going over it (excess contributions pay 6% a year until removed).
• Contributing after enrolling in Medicare, including the six months Part A can be backdated.
• Losing receipts for expenses you plan to reimburse later.
• Living in California or New Jersey and not reporting the account’s earnings on the state return.

When you die

If your spouse is the beneficiary, the HSA becomes their HSA, with all the same tax breaks. Anyone else receives the balance as taxable income in the year of your death, reduced by any of your medical bills they pay within a year. That is one reason to spend the HSA on your own health costs in later life and leave other savings, such as a Roth IRA, to heirs.

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