How Can an HSA Help Me?

What exactly is an HSA?

An HSA is just that — a savings account. This type of savings account is specifically meant to help you pay for health expenses by allowing you to use pre-tax dollars to pay for them. Which means that every dollar you put into your HSA is a dollar you won’t be taxed on. You can then use that pre-tax money on thousands of eligible health expenses. And by paying with money that you don’t have to pay income taxes on, you can effectively save up to 30% on qualified health costs.* 

What kind of health costs? Your HSA can be used to pay for doctor visits, insurance deductibles, copayments, prescriptions, and many other expenses — including many of the health products you use every day. (The rules on what’s considered a qualified health expense are set by the Internal Revenue Service (IRS), so be sure you’re spending only on what’s eligible.)

The IRS also sets limits on the amount you can contribute to your HSA each year. For 2025, you can contribute up to $4,300 for self-only coverage, and $8,550 for family coverage. You can add money to your HSA either through pre-tax payroll deductions or by making after-tax contributions and taking a tax deduction on your tax return. 

Even if you don’t add money to your HSA right away, you can still save money on your healthcare costs. Just keep your receipts for qualified health expenses (like sunscreen, allergy meds, and optical exams) and reimburse yourself later with pre-tax dollars once you’ve funded your account. You can save your receipts for years if you want — just reimburse whenever it’s right for you.

Your long-term savings

Think of your HSA as a supplement to your health insurance — with the added benefit of helping you save for long-term health costs and retirement. That’s because one especially great thing about an HSA is that the money you contribute is yours for life — there’s no deadline to spend it. Even if you leave your job, the money in your HSA belongs to you. This means you can save up for future healthcare costs, or use the funds to pay for medical expenses in retirement. You can also invest your HSA tax-free — you won’t have to pay taxes on those gains, either. (More on that later.)

The Triple-Tax Benefit

HSAs are one of the best places to set aside your cash because these accounts offer three tax breaks in accordance with IRS rules. And since you can use the money for qualified healthcare expenses, these tax breaks are like getting a discount on your health costs.

First, you can contribute money directly from your paycheck to your HSA and it won't be subject to income taxes. (You can also make separate, non-payroll related deposits and get your benefit at tax time.) 

Second, if your account allows you to invest the balance, your money can grow tax-free. 

And the third tax benefit of an HSA is that unlike other long-term savings or retirement accounts, you can withdraw your funds at any time to pay for qualified medical expenses without having to pay taxes. (You can withdraw these funds for non-medical expenses, but we don’t recommend it, as you will have to pay a 20% penalty on that amount back to the IRS, plus payroll taxes on the amount withdrawn.) We'll cover more on qualified medical expenses below.

Once you reach age 55, you can add annual “catch up” contributions, which allow you to add up to $1,000 to your HSA above the yearly contribution limit. And once you reach Medicare eligibility at age 65, something amazing happens: the 20% tax penalty for non-medical expenses is waived.

At age 65, the tax benefit still holds — there’s no tax on withdrawals for qualified expenses, but withdrawals for non-medical expenses are taxed as income. If you’ve been diligently saving throughout the course of your career, an HSA can provide a massive supplement to traditional retirement savings accounts to bolster your long-term savings potential.

Maximize your tax savings

As noted above, you can save 30% or more on income taxes when you contribute to an HSA (your savings will depend on your earnings and tax bracket). And you can maximize the savings potential of your HSA even if you don’t fully fund the account from the moment you enroll.

To get value out of your HSA, you can either: fully pre-fund your HSA before using it, fund your account in increments over time, or make a one-time contribution to your account as needed to pay for eligible health services and products. Remember, if you do not pre-fund your HSA, you can still spend on qualified health goods or services out of pocket, then fund your HSA at a later date and reimburse yourself.

To achieve the full tax benefit of your account, try using some of the resources HSA Store has to offer. One helpful tool is our Expense Dashboard, which can help you save and organize receipts by plan year to make the reimbursement process easier. 

Some other helpful tools you can find at HSA Store are our online calculators. They can help you determine your tax savings, how much to contribute to your HSA, and help you map out how you’ll use your funds now or in the future. These interactive calculators can also illustrate potential future value as you continue to fund and use the account (based on your ongoing enrollment in a qualified high-deductible health plan).

Want to know how your HSA stacks up against your 401(k) as a long-term savings vehicle? Try our HSA & 401(k) Maximizer. Just plug in your info (like salary, contribution amounts, state, etc.) and watch the magic happen. And by “magic” we mean the calculator’s best estimates on how much you may want to consider contributing to both and make the most of an HSA on your journey to retirement.

What counts as a qualified medical expense?

Product and service eligibility requirements for HSAs are laid out by the IRS. To be eligible, all products and services must fall under the IRS’s definition of “medical care” IRS Tax Code 213(d):

“The term ‘medical care’ means amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.”

So what is an HSA eligible product or service under that definition? There are far too many to list here (but this list covers it all). In short, HSA dollars can be used to pay for:

• Prescription medicines
• Doctor’s co-payments and specialist visits
• Prescription eyeglasses and contact lenses
• Over-the-counter medicines
• Menstrual care products
• First aid supplies
• Dental and vision expenses
• Medical diagnostic products
• Home health care items

You may be surprised at what you can get with your HSA. Many health tech products, like massage tools for muscles & joints, or wearables that track vital signs are eligible; as are many of your favorite skincare products, essentials for baby & mom, and much more.

Don’t forget, any money that you don’t spend on healthcare needs over the course of the year will roll over to the following year — and beyond. And you can continue saving your funds while earning tax-free interest. So get familiar with what’s eligible, and talk to your benefits administrator or HR representative to find out how to enroll.

—

Thank you for visiting the HSA Store Learning Center™. Don’t forget to follow us for more helpful tips on Facebook, Instagram, and X (formerly twitter).