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Tom, Sara, or Robin ColoradoHealth.com 8751 E. Hampden Ave, #A-1, Denver, CO 80231 303-782-0123, 303-782-0804(Fax), email=Contact_Us@ColoradoHealth.com

A Health Savings Account (HSA) is a tax-advantaged personal savings account that allows individuals with high-deductible health plans (HDHPs) to set aside pre-tax money to pay for qualified medical expenses. It offers a "triple tax benefit": Contributions are tax-deductible, growth is tax-free, and withdrawals for medical expenses are tax-free. The chart below gives a rough idea of how the plans are structured.

Key Features of an HSA

Eligibility: You must be enrolled in an HSA-qualified High Deductible Health Plan (HDHP).

Portability: The account is created and owned by you, not the insurance company or your employer. The money stays with you even if you change plans, leave the workforce, or retire.

No "Use-it-or-Lose-it": Unlike a Flexible Spending Account (FSA), unused HSA funds roll over from year to year without limit.

Triple Tax Advantage: Contributions are pre-tax (or tax-deductible). Interest and investment earnings grow tax-free. Withdrawals for qualified medical expenses are tax-free.

As of 2026 any Bronze level or Catastrophic level plan that is available through the health insurance exchange now qualifies as an HSA eligible plan, regardless of whether you purchased the plan through the exchange or directly with the carrier.

So, as long as you are on an HSA qualified plan, contributions you make to an HSA account are deductible in determining adjusted gross income (above the line). The most you can contribute annually in 2026 is $4,400 for an individual or $8,750 for a family. You can contribute the full amount to the account even if you start mid year, but you must remain on an HSA compatible plan through the end of the year. Failure to remain on an HSA compatible plan will result in a 10% penalty plus income tax.

Distributions:
The money in the HSA accumulates on a tax deferred basis and can be used to pay for any qualified medical expense.
Withdrawals for reasons other than qualified medical expenses prior to age 65 are taxable and subject to a 10% penalty.
Upon death, disability, or attaining age 65, funds can be withdrawn for non-medical reasons with no penalty, but such distributions will be included in gross income.
You can use tax-free withdrawals to pay premiums for qualified long term care insurance, COBRA or State Continuation health insurance, while receiving unemployment compensation under any federal or state law, and if you are age 65 or older, any health insurance other than a Medicare supplemental policy.