This February, our tax corner will focus on Reviewing Insurance & Protection. We are starting with a powerful yet often underutilized tool: the Health Savings Accounts (HSAs). If you are enrolled in a high-deductible health plan (HDHP), an HSA allows you to save for medical expenses while enjoying significant tax benefits.

1. The Triple Tax Advantage of HAS
   HSAs are one of the few accounts that provide three layers of tax benefits:
   • Contributions are tax-deductible. Whether you make contributions directly or through payroll deductions, they reduce your taxable income
   • Growth is tax-free. Funds in the account can be invested, and any earnings accumulate without tax
   • Withdrawals for qualified medical expenses are tax-free. You can use HSA funds for doctor visits, prescriptions, dental care, vision care, and more—without paying tax on the withdrawal
2. Long-Term Savings Potential
   Unlike Flexible Spending Accounts (FSAs), which often have a “use it or lose it” rule, HSAs allow your balance to roll over year after year. This makes them ideal for building a dedicated healthcare fund. Like a retirement account, you can invest HSA funds for growth. After age 65, funds can be withdrawn for non-medical purposes without penalty. However, these withdrawals are taxed as ordinary income, similar to a traditional IRA. This flexibility positions HSAs as a dual-purpose healthcare and retirement planning tool.
3. Eligibility for HSA Contributions
   To contribute to an HSA, you must be enrolled in a high-deductible health plan (HDHP). HDHPs typically have lower monthly premiums but higher out-of-pocket costs before insurance begins covering claims. For 2026, an HDHP is defined as a plan with a minimum deductible of approximately $1,700 for self-only coverage and $3,400 for family coverage. Note that you cannot contribute to an HSA if you’re enrolled in Medicare or covered by another non-HDHP plan.
4. 2026 HSA Contribution Limits
   The IRS adjusts HSA contribution limits annually for inflation. For 2026, the inflation‐adjusted HSA contribution limits increase modestly to:
   • Self-only HDHP coverage: $4,400
   • Family HDHP coverage: $8,750
   • Catch-up contribution (ages 55 and older): $1,000
5. Smart Tax Planning Opportunities
   HSAs can be a cornerstone of your financial strategy. Here are three ways to leverage them:
   • Treat your HSA as a medical retirement account: Pay current medical expenses out of pocket and let your HSA grow tax-free for future healthcare costs, which can be significant in retirement
   • Maximize contributions early in the year: Contributing the maximum amount early allows more time for tax-free investment growth. If cash flow is tight, consider contributing monthly through payroll deductions to reduce taxable income
   • Coordinate with other tax-advantaged accounts: Pair your HSA with a 401(k) or IRA to diversify tax benefits. For example, use your HSA for healthcare costs and your IRA for other retirement expenses to optimize tax efficiency
6. Action Steps for February 2026
   As you begin this month’s tax focus on insurance and protection, take these steps to maximize your HSA:
   • Verify HDHP enrollment: Ensure your health plan qualifies as an HDHP to contribute to an HSA
   • Check contribution levels: Confirm you are on track to meet the 2026 contribution limits, and consider catch-up contributions if you’re 55 or older
   • Review investment options: If your HSA offers investment choices, evaluate whether your funds are allocated to align with your risk tolerance and time horizon
   • Reassess your healthcare needs: Use February to estimate upcoming medical expenses and decide whether to use HSA funds now or preserve them for future growth

Why It Matters Now

With healthcare costs rising and tax laws changing, HSAs offer a unique opportunity to save smarter. Whether you are already using an HSA or considering an HDHP to become eligible, this account can protect your wealth while preparing you for future medical needs.