How Health Savings Accounts (HSAs) Work: The Triple Tax Advantage
How HSAs work: pairing a high-deductible health plan with a triple-tax-advantaged account, eligibility, 2026 limits, and long-term uses.
Read the transcript
In another video, we talked about the differences between two different types of FSAs. In this quick conversation, I want to talk with you about HSAs. My name is Stefan. I run a nationwide wealth management firm called Whitwell & Company.
Pre-tax dollars, and use it or keep it
HSAs are health savings accounts, and they're pretty cool because you can fund them with pre-tax dollars. In 2025, the maximum contribution is $4,300 for individuals. [Editor's note: here "for individuals" means self-only HDHP coverage; the 2025 family limit was $8,550. These limits change every year. For 2026 the IRS limits are $4,400 self-only and $8,750 family, plus a $1,000 catch-up contribution at age 55 or older.] So you make a pre-tax contribution of $4,300, and one of the features that makes them very attractive is that they're use-it-or-keep-it, unlike FSAs, which are use-it-or-lose-it. So once you put that in the account, it's yours forever unless you spend it.
How you qualify
To qualify, there's an additional requirement that you need to fulfill that is not the case with FSAs. To get an HSA, one of the requirements is that you belong to a high deductible, or you have a high deductible health insurance plan. So one of the primary requirements in order to get an HSA is you've got to have a high deductible health insurance plan. If you don't, you don't qualify. But if you do have one, it'd be really smart to combine that with your HSA. Sometimes you don't have a choice, you just have to go with whatever the company offers. But just be aware, there are these differences.
HSA vs. FSA, and growing it tax-free
I think if you have the choice of both, as far as the FSA versus the HSA, the HSA is great because you can put away a little bit more, $4,300 versus $3,300. And it's not use-it-or-lose-it, it's use-it-or-save-it. And when I say save it: if you don't use it, the folks that run these types of accounts give you the ability to invest in stocks in the equity market. And there's some people who just max that out, who don't need to use it during the year thanks to good health, and they've grown it and grown it and grown it and grown it. And it's a tax-free account. So really, really valuable to use, whether you're using it to build your savings, or tax-free savings, or you're just using it to stretch your dollar and get more coverage on out-of-pocket medical expenses.
Transcript edited for readability from the video. Machine-transcribed; may contain minor errors.
