Last reviewed: 3 October 2026

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Health savings accounts and high-deductible health plans: what the tax code says

The short answer: the tax code lets a person covered by a high deductible health plan put cash in a health savings account and deduct it, within monthly limits based on dollar amounts that it adjusts for the cost of living. Money used for qualified medical expenses is not taxed as income.^[1]

The short version

• An HSA (health savings account) is a trust set up only to pay a person's qualified medical expenses. You need to be covered by a high deductible health plan to contribute.^[1]
• A "high deductible health plan" (HDHP) must meet minimum-deductible and maximum-out-of-pocket tests that the statute sets in dollars.^[1]
• The dollar amounts printed in the statute are base amounts. The law says they are adjusted by a cost-of-living formula, so check the current year's figures with the IRS.^[1]
• Money used for qualified medical expenses is not taxed as income. Other withdrawals are, plus a 20 percent additional tax with some exceptions.^[1]

Who can contribute: the "eligible individual"

The statute lets an "eligible individual" deduct cash contributed to their HSA for the year.^[1] For any month, you are an eligible individual if you are covered by an HDHP on the first day of that month. You must also not be covered by another health plan that is not an HDHP and that covers any benefit the HDHP covers.^[1]

The statute says certain coverage is disregarded in that test. This includes coverage for accidents, disability, dental care, vision care, long-term care, and telehealth and other remote care, and "permitted insurance" such as workers' compensation or tort liabilities, specified-disease insurance and fixed-amount-per-day hospital insurance.^[1] A direct primary care arrangement (primary care for a fixed periodic fee) is not treated as a health plan for this test, if its fees stay at or under $150 a month (twice that if it covers more than one person). That $150 is also a base amount.^[1]

What counts as a high deductible health plan

The statute's base amounts: the annual deductible must be at least $1,000 for self-only coverage and twice that for family coverage. The deductible plus other required out-of-pocket costs, not counting premiums, may not exceed $5,000 for self-only coverage and twice that for family coverage.^[1]

The statute also says a plan does not fail to be an HDHP merely because it has no deductible for preventive care, for telehealth and other remote care, for selected insulin products, or for benefits provided under the federal surprise-billing rules. It says plans using a provider network may have a higher out-of-pocket limit for out-of-network services without failing the test. It also says bronze and catastrophic plans sold through an Exchange are treated as HDHPs.^[1]

Contribution limits

The monthly limit is one-twelfth of a yearly base amount. The base amounts are $2,250 for self-only HDHP coverage and $4,500 for family coverage, as of the first day of the month.^[1] People age 55 or older by the end of the year get an added contribution amount, which is $1,000 for 2009 and later years.^[1] Other rules in the statute:

• If spouses are married to each other and either has family coverage, both are treated as having only family coverage, and the limit is divided equally between them unless they agree on a different division.^[1]
• The limit is zero for the first month a person is entitled to Medicare (Title XVIII of the Social Security Act) and every month after.^[1]
• Contributions are limited to cash (rollovers are the exception), and the limit counts employer contributions excluded from income.^[1]
• If you return an excess contribution, with its net income, by the tax-return due date (including extensions), the statute lets you avoid including the excess in income. The net income is included.^[1]

Adjustments. Subsection (g) says the dollar amounts for the contribution limits and the HDHP tests are increased each year by a cost-of-living adjustment, rounded to a multiple of $50. The Treasury Secretary is to publish the adjusted amounts no later than June 1 of the preceding calendar year.^[1] We therefore do not print this year's figures. Check the IRS website for them.

The account and how withdrawals are treated

The statute defines an HSA as a trust created in the United States exclusively to pay the account beneficiary's qualified medical expenses. Its trustee must be a bank, an insurance company, or another person the Treasury approves. No trust assets may be invested in life insurance contracts. The beneficiary's interest in the balance is nonforfeitable.^[1]

"Qualified medical expenses" are amounts paid for medical care, as defined in section 213(d), for the account beneficiary, spouse and dependents, to the extent insurance or others have not paid them.^[1] Paying for insurance is generally not a qualified expense. The statute lists exceptions, including a health plan during any period of continuation coverage required under any federal law, long-term care insurance, health coverage while receiving unemployment compensation, and, once someone reaches Medicare age, health insurance other than a Medicare supplemental policy.^[1]

How to verify this yourself

Read 26 U.S.C. § 223 at the link below, especially subsections (b), (c), (d), (f) and (g). For the current year's dollar amounts, look for the figures the Treasury publishes under subsection (g).^[1] Ask your plan or HSA trustee for their plan documents showing whether a plan is an HDHP.

What this page does not cover

We read only the statute. We did not read IRS guidance, regulations, employer-contribution rules, or state tax treatment, which can differ. This is general information, not tax, legal or insurance advice, and it does not say whether an HSA or a particular plan suits you. For your own situation, ask a tax professional, the IRS, or your plan administrator.

Your next step

If you are comparing plans, ask the insurer or your employer to confirm in writing whether a plan is an HDHP that can be paired with an HSA. Then look up this year's limits on the IRS site before you contribute. For help with plan terms, our health claim appeals guide shows where to take disputes.

Related checks

Our standard explains how we check an agent's license and disciplinary history. Check an agent reports our findings at category level, as a method and not a verdict. Neither reviews any insurer, plan or product. To confirm the person selling you coverage is licensed, see how to check an agent's license. More plain-language guides are in the agent guides.

When we will update this page

We re-read the sources when they change. If something here is out of date, tell us. Corrections are dated on the page.

References

1. [1] Legal Information Institute (Cornell), 26 U.S.C. § 223, Health savings accounts (unofficial text), read 3 October 2026 — www.law.cornell.edu/uscode/text/26/223