Health Savings Accounts: How HSAs Work and the 2026 and 2027 IRS Limits

Who can contribute to an HSA, the 2026 and 2027 IRS limits, the new bronze-plan rule, what the money can pay for, and how Medicare changes things.

iHealthBenefit · Last reviewed October 26, 2026 · 6 min read

A health savings account, or HSA, is a savings account for medical costs that comes with unusual tax treatment. Money can go in before tax or as a deduction, it can grow without tax, and it can come out tax-free when you spend it on qualified medical expenses. The catch is that you can only contribute while you are covered by a qualifying health plan and meet a few other conditions.

HSAs also changed recently. A federal law signed on July 4, 2025 (Public Law 119-21) expanded who can contribute starting in 2026, and the IRS released guidance on those changes in December 2025.

This guide explains the federal rules as of October 2026, using IRS publications. It is general information, not tax, financial or legal advice. HSA rules are detailed and the dollar limits change every year, so check IRS Publication 969 and consider a tax professional before making decisions. State tax treatment is not covered here.

Who can contribute

IRS Publication 969 (2025) says that to contribute to an HSA you must:

Be covered under a high deductible health plan (HDHP) on the first day of the month.
Have no other health coverage, except types the IRS permits.
Not be enrolled in Medicare.
Not be claimable as a dependent on someone else's tax return.

Other coverage can disqualify you. Publication 969 says that if you are covered by a general health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) that pays medical expenses, you generally cannot contribute. A limited-purpose FSA or HRA (generally for things like dental and vision care) or a post-deductible FSA or HRA does not block contributions.

Three changes from the 2025 law matter here, according to the IRS's December 9, 2025 news release (IR-2025-119) and Notice 2026-5:

Telehealth: a plan can cover telehealth and other remote care before the deductible without losing HDHP status, permanently, for plan years beginning on or after January 1, 2025.
Bronze and catastrophic plans: as of January 1, 2026, bronze and catastrophic plans available through a Marketplace (Exchange) are treated as HSA-compatible even if they do not meet the usual HDHP definition, and Notice 2026-5 says the same plan bought outside the Exchange also qualifies, as long as it is available through an Exchange.
Direct primary care: beginning January 1, 2026, people in certain direct primary care arrangements can still contribute and can use HSA money tax-free for the periodic fees. For 2026, Notice 2026-5 says the arrangement's fees cannot exceed $150 a month, or $300 a month for an arrangement covering more than one person, and IRS Revenue Procedure 2026-24 keeps those same limits for 2027.

The 2026 and 2027 limits

For calendar year 2026, IRS Revenue Procedure 2025-19 sets these amounts:

Contribution limit: $4,400 for self-only HDHP coverage and $8,750 for family coverage.
HDHP minimum deductible: $1,700 for self-only and $3,400 for family coverage.
HDHP maximum out-of-pocket expenses: $8,500 for self-only and $17,000 for family coverage.

For calendar year 2027, IRS Revenue Procedure 2026-24 sets these amounts:

Contribution limit: $4,500 for self-only HDHP coverage and $9,000 for family coverage.
HDHP minimum deductible: $1,750 for self-only and $3,500 for family coverage.
HDHP maximum out-of-pocket expenses: $8,700 for self-only and $17,400 for family coverage.

IRS Publication 969 (2025) says the contribution limit increases by $1,000 if you are an eligible individual age 55 or older at the end of the tax year. For comparison, Publication 969 lists the 2025 limits as $4,300 for self-only and $8,550 for family coverage. The IRS adjusts these figures each year, so check the current revenue procedure before you set your contributions.

A few timing rules can trip people up. Publication 969 (2025) explains that contributions for a tax year can be made into the following year; for example, contributions made from January 1, 2026, through April 15, 2026, could be designated for 2025. The same publication describes the "last-month rule": if you are eligible on December 1, you may be able to contribute for the whole year, but you must then stay eligible through a testing period that runs through the end of the following year, or some of the contribution becomes taxable income plus a 10% additional tax. Publication 969 (2025) also says excess contributions are generally subject to a 6% excise tax for each year they stay in the account.

Why people use HSAs

Publication 969 (2025) lists the main tax benefits:

You can deduct contributions you make yourself even if you do not itemize deductions.
Employer contributions, including those made through a cafeteria plan, may be excluded from your income.
Contributions stay in the account until you use them; there is no requirement to spend the balance each year.
Interest and other earnings in the account are tax-free.
Distributions may be tax-free if you use them for qualified medical expenses.
The account is portable. It stays with you if you change employers or leave the workforce.

Spending the money

Qualified medical expenses can include those for you, your spouse and your dependents. Publication 969 says expenses only count if they were incurred after you established the HSA, so opening the account early matters.

HSA money generally cannot pay insurance premiums. Publication 969 lists exceptions: long-term care insurance, health care continuation coverage such as COBRA, health coverage while you receive unemployment compensation, and Medicare and other health coverage if you are 65 or older (but not a Medicare supplemental policy such as Medigap).

If you take money out for anything else, it is taxed as income and, according to Publication 969 (2025), may face an additional 20% tax. That additional tax does not apply to distributions made after you become disabled, reach age 65 or die. You must keep records showing that distributions paid for qualified medical expenses, but you do not send them with your return.

Medicare and HSAs

Publication 969 says your contribution limit drops to zero beginning with the first month you are enrolled in Medicare, and the rule applies to periods of retroactive Medicare coverage. If Medicare coverage is backdated, contributions made during that period become excess contributions. If you are approaching Medicare age and still contributing, coordinate the timing with your benefits office or a tax professional. You can keep using an existing balance for qualified expenses after you enroll.

Watch out for "HSA-eligible" sales claims

The IRS publishes FAQs on whether nutrition, wellness and general health costs count as medical expenses for HSAs and similar accounts. The IRS says medical expenses must be primarily to alleviate or prevent a physical or mental disability or illness, and do not include expenses that are merely beneficial to general health. A gym membership, for example, generally qualifies only in narrow cases, such as treating a specific disease diagnosed by a physician. Be skeptical of any seller who says ordinary food, supplements or fitness products are HSA-eligible for everyone; if the IRS rules are not met, HSA money spent on it is generally treated as a taxable distribution.

Where to get help

Your HSA trustee or employer can explain account features and fees. Your insurer can confirm whether your plan is HSA-compatible; the IRS itself suggests asking your insurance provider. For tax questions, the IRS Interactive Tax Assistant and a licensed tax professional, such as a CPA or enrolled agent, can help.

Key takeaways

You need HSA-compatible coverage, no disqualifying other coverage, no Medicare enrollment and no dependent status to contribute.
IRS contribution limits are $4,400 (self-only) and $8,750 (family) for 2026 under Revenue Procedure 2025-19, rising to $4,500 and $9,000 for 2027 under Revenue Procedure 2026-24, plus a $1,000 catch-up at 55 or older per Publication 969 (2025).
Starting January 1, 2026, bronze and catastrophic plans count as HSA-compatible, according to IRS Notice 2026-5.
Withdrawals for qualified medical expenses are tax-free; other withdrawals are taxed and may face a 20% additional tax before 65.
Contributions stop when Medicare starts, including retroactive Medicare coverage.

Sources

Our articles are general information, not medical, insurance, tax or legal advice, and we don't sell insurance or recommend specific plans or companies.

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