Health Savings Accounts (HSAs) can be a powerful tool for covering medical costs while offering long-term financial benefits. If you already have an HSA or are thinking about opening one, now is a good time to understand how upcoming changes from the IRS will affect your account.
With healthcare expenses continuing to rise, many individuals and families are looking for smart ways to prepare. HSAs allow you to set aside money on a pre-tax basis to pay for qualified medical expenses, from co-pays and prescriptions to dental work and more. The money grows tax-free, and as long as it's used for eligible healthcare costs, withdrawals aren't taxed either.
What's Changing for 2026?
In May 2025, the IRS released updated rules for HSAs that will take effect in the 2026 calendar year. Here are the key updates to know:
Annual HSA contribution limits:
- $4,400 for individuals with self-only coverage.
- $8,750 for those with family coverage.
High Deductible Health Plan (HDHP) qualifications:
- Minimum deductible of $1,700 for individuals and $3,400 for families.
- Maximum out-of-pocket expenses (excluding premiums) are $8,500 for individuals and $17,000 for families.
Excepted Benefit HRA (Health Reimbursement Arrangement):
- The maximum amount newly available for plan year 2026 is $2,200.
These adjustments are made annually to account for inflation, helping ensure HSAs continue to provide meaningful value in light of changing healthcare costs.
How These Changes Impact You
Higher contribution limits offer a greater opportunity to build savings for medical costs. For those dealing with high deductibles or planning for future healthcare expenses, the ability to set aside more tax-free money is a welcome advantage.
If you're using your HSA as a long-term savings vehicle, this is another chance to build your balance more quickly. HSA funds roll over from year to year and can be invested, making them a unique and flexible way to grow your savings over time.
Staying current with IRS rules also helps you avoid penalties. For example, contributions that exceed the allowed limits may be subject to taxes and fees unless corrected in time.
Strategic Planning Makes a Big Difference
A Health Savings Account can be more than just a way to cover this year's medical bills. With proper planning, it can be one of the cornerstones of your financial strategy. Whether you're preparing for retirement or just trying to ease the burden of healthcare costs, how and when you contribute to your HSA can make a big difference.
That's where a CPA can help. Working with a trusted advisor can ensure you maximize your HSA contributions without crossing the limits, taking full advantage of available deductions, and building a strategy that supports both your short- and long-term goals.
FAQs About HSA Changes
Q: What happens if I contribute too much to my HSA?
A: Excess contributions may be taxed and could incur a penalty. A CPA can help you correct the issue before year-end to minimize consequences.
Q: Are HSA withdrawals always tax-free?
A: Only if the money is used for qualified medical expenses. Non-qualified withdrawals are subject to income tax and may also face a 20% penalty.
Q: Can I contribute to an HSA if I'm on Medicare?
A: No, you can no longer contribute to an HSA once you enroll in Medicare. However, you can still use the funds for eligible expenses.
Make Your HSA Work Harder for You
HSAs are a smart way to save, but they work best when they're paired with expert guidance. With new IRS rules and higher contribution limits for 2026, now is the time to review your HSA strategy.
At Myrick CPA, we help individuals and families across the D.C. area and beyond make the most of their healthcare savings. From contribution planning to tax-smart strategies, we'll help you keep more of what you earn. Ready to take the next step? Contact us to schedule a consultation.
