HSA FAQs: How Health Savings Accounts Work & What They Cover
Sep 30, 2025
Below you’ll find answers to the most common questions about Health Savings Accounts (HSAs). Click a section to jump directly to what you’re looking for.
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1. HSA Basics
What does HSA stand for?
HSA stands for Health Savings Account. It’s a special account that lets you save for qualified medical expenses with unique tax advantages.
What is an HSA and how does it work?
An HSA is a tax-advantaged savings account for people covered by a high-deductible health plan (HDHP). You contribute pre-tax money, it can grow tax-free, and withdrawals for qualified medical expenses are tax-free.
Who is eligible for an HSA?
To contribute you must: (1) be covered by an HDHP, (2) not be enrolled in Medicare, and (3) not be claimed as a dependent on someone else’s tax return.
Are HSAs worth it?
Often yes. HSAs offer a triple tax benefit: contributions can be tax-deductible, growth is tax-free, and qualified withdrawals are tax-free. If you can invest and delay spending, an HSA can be a powerful long-term tool.
Are HSA and FSA the same?
No. An HSA is yours, rolls over every year, and can be invested. An FSA is employer-owned and generally follows a “use-it-or-lose-it” rule.
2. HSA Contributions
Are HSA contributions pre-tax or tax-deductible?
Yes. Payroll contributions are typically pre-tax. Direct contributions are an above-the-line deduction even if you don’t itemize.
Are HSA contributions subject to FICA?
Employer HSA contributions aren’t subject to Social Security or Medicare tax. Employee payroll contributions are pre-FICA. Direct (non-payroll) contributions may still be subject to FICA.
Where are HSA contributions reported on taxes?
W-2: Box 12, code W. Form 1040: Schedule 1 (adjusts AGI).
How much can I contribute?
2024: $4,150 (self-only) / $8,300 (family) + $1,000 catch-up at 55+.
2025: $4,300 (self-only) / $8,550 (family) + $1,000 catch-up at 55+.
How much should I contribute?
Aim for the annual maximum if possible. At minimum, cover expected out-of-pocket costs. Many treat the HSA like a “stealth IRA” by contributing the max and paying small costs out of pocket.
3. Using Your HSA (Spending & Reimbursements)
What can an HSA be used for?
Qualified medical expenses: doctor visits, prescriptions, dental and vision care, glasses/contacts, orthodontics, therapy, and many OTC items. See IRS Publication 502 for details.
Can an HSA pay for dental, glasses, or orthodontics?
Yes—these are generally qualified medical expenses.
Can I use an HSA for massage, vitamins, or gym memberships?
Massage: Only if medically necessary and prescribed.
Vitamins/supplements: Not covered unless prescribed for a specific medical condition.
Gym: Not covered (even if recommended for health).
Can an HSA pay for insurance premiums?
Generally no, with important exceptions: Medicare premiums (65+), COBRA premiums, and long-term care insurance (within IRS limits).
How does HSA reimbursement work?
Pay with your HSA or pay out of pocket and reimburse yourself later. There’s no statutory deadline if the expense occurred after the HSA was opened and you keep proper receipts.
4. Investing & Growing Your HSA
Can I invest HSA funds?
Yes. Many providers offer mutual funds and ETFs once you meet a minimum cash threshold.
Which HSA account is best?
Look for low fees, broad investment options, and easy online access. Popular choices include Fidelity, Lively, and HSA Bank.
Are HSA funds available immediately?
Yes, once contributions are deposited. If investing, you may need to keep a small cash buffer depending on the provider’s rules.
5. HSAs and Taxes
Are HSA distributions taxable?
Not when used for qualified medical expenses. For non-medical expenses: under 65 the withdrawal is taxable and subject to a 20% penalty; 65+ it’s taxable with no penalty.
Why would an HSA distribution be taxable?
If it wasn’t for a qualified medical expense or you can’t substantiate it with records.
How many HSA rollovers or transfers per year?
Rollover: one per 12 months.
Trustee-to-trustee transfer: unlimited.
How often are HSAs audited?
Formal audits are uncommon, but you must maintain receipts and documentation for any reimbursements.
6. Life Events and HSAs
What happens to my HSA when I leave a company?
You keep it. It’s your account. You can spend from it at any time; you can only contribute while covered by an HDHP.
What happens to my HSA when I retire?
You can use it tax-free for medical expenses, including Medicare premiums and some long-term care costs. Non-medical withdrawals are taxed as ordinary income with no penalty.
What happens when I turn 65?
Non-medical withdrawals lose the 20% penalty and are just taxable income. Medical expenses remain tax-free.
What happens to an HSA when you die?
If your spouse is the beneficiary, it becomes their HSA. If the beneficiary is not your spouse, the account ends and its value is taxable to that beneficiary in the year of death.
7. Practical HSA How-To
Where can I open an HSA?
Banks, credit unions, and investment firms. Many prefer providers with low fees and strong investment menus (e.g., Fidelity, Lively, HSA Bank).
Where can I use HSA money?
Use your HSA debit card with eligible merchants or pay out of pocket and reimburse yourself later.
How does the HSA card work?
It operates like a debit card tied to your HSA. It can decline for ineligible items, merchant settings, or insufficient balance.
How do I know who manages my HSA?
Check your benefits materials, paystub/W-2, or the bank/custodian where you opened the account.
