You may have heard about tax-deferred individual retirement accounts (IRAs) for your retirement savings, but what about a similar type of account to help pay for certain medical expenses? It's called a Health Savings Account (HSA). Here are a few points to help you decide if an HSA is right for you or your family.
If you are enrolled in only one health insurance plan and it has a high deductible, you are likely eligible to open an HSA.
The deductible is the dollar amount you must pay before the insurance begins to pay certain costs. In calendar year 2025, an individual whose health plan has a deductible of at least $1,650 qualifies for an HSA. For a family, the minimum deductible is $3,300.
Whether your employer offers a high-deductible health insurance plan or you purchase a high-deductible plan on your own, you may be eligible for an HSA account. Once you have this insurance coverage, check to see if the insurer automatically opens a health savings account. If not, you can open one with a bank or other financial institution that offers HSAs.
Consider the benefits (in addition to helping with medical expenses) and the limitations.
With an HSA, you can save money that can help you avoid a shock to your finances from an unexpected medical bill. Unlike most flexible spending accounts, money can accumulate in the HSA account from year to year, and you do not lose the money you haven’t spent at the end of the year.
For 2026, the IRS limits how much you can contribute to a Health Savings Account (HSA) if you’re covered by a qualifying high-deductible health plan (HDHP):
- Up to $4,400 for individuals with self-only coverage
- Up to $8,750 for family coverage
If you’re age 55 or older, you can contribute an additional $1,000 catch-up amount each year — this hasn’t changed.
Contributions, any investment earnings, and withdrawals used for qualified medical expenses are all tax-free.
One important point to remember is that funds from the HSA account used for ineligible medical expenses will be taxed and may be subject to a significant tax penalty.
Be careful if a debit card is provided for you to access your HSA.
It's a good idea to keep any debit cards associated with your HSA separate from your regularly used debit and credit cards to avoid the risk of using them for non-medical purchases and inadvertently incurring a tax penalty. Also, if the card is not clearly marked as an HSA debit card, tape a note to the front of the card or mark it somehow to differentiate it from your other debit and credit cards.
Have questions or need assistance?
If you have questions about this topic or need assistance with your banking needs, please speak to one of our bankers at your local Bar Harbor Bank & Trust branch. We’re here to help you build a solid financial future.
