A Health Savings Account (HSA) is a savings account available to some High-Deductible Health Plans (HDPA). The contribution cap for an HSA in 2026 is $4,400 for self or $8,750 for families. Plan holders who are 55 and older can contribute an additional $1,000. The cap includes any employer contributions. So, if your employer contributes $1,000 a year to your HSA, you can contribute $3,400 for self, or $7,750 for families. Your contributions can be invested.
This account is for medical expenses and is a triple tax advantaged account. Your contributions made through your employer are pre-tax contributions, are FICA tax exempt, are exempt from dividend and capital gain taxes, and are not taxed at withdrawal. Note that CA, NJ, TN, and NH tax HSA accounts.
If for whatever reason you do not want to contribute to your employer sponsored HSA you can open your own account. Just be mindful of contribution limits year to year, and whether or not you qualify to contribute.
How is this different from a Flexible Spending Account (FSA)?
Funds you contribute to an FSA have a use it or lose it policy in that the money does not roll over. Money deposited in an HSA does roll-over and has no expiration date. You can choose to pay your medical expenses immediately from your HSA. Or you can invest the money and pay for medical expenses out of pocket. In the investment scenario you should save your medical receipts. As you can reimburse yourself at any time. People 65 or older with an HSA can withdraw money from an HSA for any reason. This money is taxed at regular income rates.