Health care costs continue to rise, prompting many to explore more cost-effective insurance options. One increasingly popular approach is combining a high-deductible health plan (HDHP) with a Health Savings Account (HSA). This pairing can lower your monthly premiums and offer significant tax advantages—both now and in the future.
Why HSAs Offer Powerful Tax Benefits
HSAs are more than just savings accounts—they’re tax-advantaged tools that can help you manage medical expenses efficiently.
1. Pretax or Tax-Deductible Contributions
Your HSA contributions reduce your taxable income, saving you money in the year they’re made.
2. Employer Contributions Are Tax-Free
Any HSA contributions made by your employer aren’t counted as taxable income.
3. Tax-Free Growth
Interest or investment earnings within your HSA grow tax-deferred, similar to a traditional IRA.
4. Tax-Free Withdrawals for Medical Expenses
Withdrawals used for qualified medical expenses are completely tax-free. Non-qualified withdrawals are taxed and typically incur a 20% penalty.
5. Retirement Flexibility After Age 65
After age 65, you can withdraw HSA funds for any purpose without penalty—though non-medical withdrawals are still taxed.
2026 HSA and HDHP Contribution Limits
To contribute to an HSA, you must be enrolled in an HDHP. Here are the updated thresholds for 2026:
HDHP Minimum Deductibles
- Self-only coverage: $1,700
- Family coverage: $3,400
(Up from $1,650 and $3,300 in 2025)
HDHP Maximum Out-of-Pocket Costs
- Self-only coverage: $8,500
- Family coverage: $17,000
(Up from $8,300 and $16,600 in 2025)
Expanded HDHP Definition
Starting in 2026, Bronze and Catastrophic plans from ACA exchanges will also qualify as HDHPs.
HSA Contribution Limits
- Self-only coverage: $4,400
- Family coverage: $8,750
(Up from $4,300 and $8,550 in 2025) - Catch-up contribution (age 55+): $1,000
Note: If you only have HDHP coverage for part of the year or enroll in Medicare, your contribution limit may be reduced. However, you can still use your HSA for qualified medical expenses tax-free.
Is This the Right Choice for You?
Pairing an HDHP with an HSA can be a financially savvy move—especially for healthy individuals with minimal medical expenses. Lower premiums today and tax-free savings for future health needs or retirement make this strategy appealing. However, it’s not ideal for everyone.
Contact us to explore whether this option aligns with your financial and health care goals.