First published: January 29, 2026 / Last updated: February 27, 2026

What is a Health Savings Account (HSA)?

A Health Savings Account (HSA) is a tax-advantaged savings account designed to help people pay for qualified medical expenses. HSAs are regulated by the IRS and are only available to individuals enrolled in a qualifying high-deductible health plan (HDHP).

Unlike some other health accounts, an HSA is owned by you, not your employer, and unused funds roll over year after year. HSAs can also function as long-term savings accounts due to their unique tax advantages.

How an HSA works

An HSA allows you to set aside money on a pre-tax basis and use it to pay for qualified medical expenses. Contributions can be made by you, your employer, or both, and the money can be spent immediately or saved for future use.

• You must be enrolled in a qualifying high-deductible health plan
• The account is owned by you, even if opened through an employer
• Unused funds roll over indefinitely
• The account stays with you if you change jobs or insurance

HSA vs FSA: a common point of confusion

Many people confuse HSAs with Flexible Spending Accounts (FSAs). While both offer tax advantages for healthcare expenses, they operate very differently.

For a deeper comparison, see HSA vs FSA vs HRA.

The triple tax advantage of an HSA

HSAs are unique because they offer three separate tax advantages when used correctly. No other health or retirement account combines all three.

• Tax-deductible contributions: Contributions reduce your taxable income
• Tax-free growth: Interest and investment gains are not taxed
• Tax-free withdrawals: Withdrawals for qualified medical expenses are not taxed

Investing your HSA

Many HSA providers allow you to invest your HSA balance once it reaches a minimum threshold. Investment options may include mutual funds, ETFs, or other market-based assets.

When invested, an HSA can function similarly to a retirement account while still retaining its ability to pay for qualified medical expenses tax-free.

High-deductible health plan (HDHP) requirements

To be eligible for an HSA, you must be enrolled in a qualifying high-deductible health plan. The IRS defines HDHPs using minimum deductible and maximum out-of-pocket thresholds that change annually.

Not all plans with high deductibles qualify, so it is important to confirm that your health plan meets current IRS requirements. If you are unsure, start with what qualifies as an HDHP.

The "shoebox" reimbursement strategy

One lesser-known HSA feature is that there is no deadline to reimburse yourself for qualified medical expenses, as long as the expense occurred after your HSA was opened.

This strategy, often called the "shoebox strategy," allows you to pay for medical expenses out of pocket today, keep the receipts, and reimburse yourself years or even decades later. If done correctly, those reimbursements are tax-free.

HSAs after age 65

After age 65, you can continue to use your HSA for qualified medical expenses tax-free. Withdrawals for non-medical expenses are subject to ordinary income tax, but no longer incur the additional penalty that applies to younger account holders.

Sources

• Publication 969 - IRS

Disclaimer

This page is for educational purposes only and is not tax or legal advice. Check with your HSA administrator or a qualified tax or legal professional if you have questions about your specific situation.