What is an HSA Account and How Does It Work?

Check eligibility on the go — browse 7,000+ HSA-eligible products in the free app.

What is an HSA and how it works

Health Savings Account (HSA) is a tax-advantaged savings account for medical expenses that can help individuals save money for health care costs. It allows you to contribute pre-tax money, grow tax-free, and withdraw tax-free for qualified medical expenses.

Here's how an HSA account works:

• You must be enrolled in a high-deductible health plan (HDHP) to be eligible for an HSA.
• You or your employer can contribute funds to your HSA up to the annual limit set by the IRS.
• The contributions you make to your HSA are tax-deductible, reducing your taxable income.
• The money in your HSA can be used to pay for qualified medical expenses such as doctor visits, prescriptions, and dental care.
• The funds in your HSA roll over year after year, so you don't lose any unused money.
• Once you turn 65, you can withdraw money from your HSA for non-medical expenses without penalty, although you will pay income tax on the withdrawals.

An HSA account, also known as a Health Savings Account, provides a smart way for individuals to manage healthcare expenses while enjoying significant tax advantages. By contributing pre-tax dollars, you can effectively lower your taxable income while accumulating funds that only grow tax-free until you need them.