What Is an HSA and Who Can Use One?

A Health Savings Account (HSA) is a tax-advantaged savings account available to individuals enrolled in a High-Deductible Health Plan (HDHP). For 2024, an HDHP is defined as a plan with a minimum deductible of $1,600 (individual) or $3,200 (family).

The Triple Tax Advantage of an HSA

  1. Tax-Deductible Contributions: For 2024, the limit is $4,150 (individual) or $8,300 (family), plus $1,000 catch-up if you are 55+.
  2. Tax-Free Growth: HSA funds invested in index funds or ETFs grow completely tax-free.
  3. Tax-Free Withdrawals: Distributions for qualified medical expenses are tax-free. After age 65, you can withdraw for any purpose (taxed as ordinary income).

HSA vs. Flexible Spending Account (FSA)

FeatureHSAFSA
Rolls over year to yearYes — unlimitedNo (use-it-or-lose-it)
Self-employed eligibleYesOnly through employer
Investment growthYesNo