A health savings account, or HSA, is a tax-advantaged savings account that taxpayers enrolled in high-deductible health plans (HDHPs) can use to pay for qualified medical expenses.
For 2023, your maximum combined contribution to an HSA—that is, the sum of what you, your employer, and anyone else contributed—is $3,850 if you're covered by an individual (self-only) HDHP and $7,750 if you're covered by a family HDHP (maximum contributions increase to $4,850 and $8,750, respectively, if you were at least 55 years of age on December 31, 2023).
There are penalties if you have an excess contribution to your HSA unless the excess amount is withdrawn before the due date of your return, including extensions. Also, any HSA funds that were used to pay for something other than qualified medical expenses will be subject to additional taxes.
To open an HSA, you must be enrolled in an HDHP and you can’t be covered by Medicare or other health insurance policy, with a few exceptions. You also can’t be eligible to be claimed as a dependent on another return, regardless of whether somebody else actually claims you.
Although many taxpayers with HSAs initially set them up through their employer, the HSA belongs to the taxpayer, even if their employer funded 100% of the contributions. If the taxpayer leaves the company or switches their insurance to a non-HDHP, they can use any funds remaining in the HSA for qualified medical expenses, but can't contribute to the HSA if they're no longer enrolled in an HDHP. Contributions can resume once the taxpayer re-enrolls in an HDHP, assuming all other HSA conditions are met.
When you open an HSA for the first time, you'll start dealing with some new tax forms:
- Form 5498-SA, an informational form that doesn't need to be filed
- Form 1099-SA if you used HSA funds to pay for medical expenses
- Form 8889, which reports HSA information on your federal tax return
