You can open an HSA if you have a high-deductible health plan and meet IRS income limits

To open a Health Savings Account (HSA), you must be enrolled in a high-deductible health plan (HDHP) — that is the primary requirement. Your HDHP must meet IRS minimum deductible amounts, which change yearly. For 2024, that means at least $1,600 for individual coverage or $3,200 for family coverage. You also cannot be claimed as a dependent on someone else's tax return, and you cannot be enrolled in Medicare.

Income limits apply only if you are self-employed or claim self-employment income on your taxes. If you work for an employer and they offer an HDHP, there are no income restrictions. The IRS sets income thresholds for self-employed filers, and they vary by filing status — check the IRS website or ask a tax professional for the current year's limits if this applies to you.

You cannot have other health coverage that overlaps with your HDHP — no spouse's plan, no parent's plan, no separate medical plan. Dental and vision coverage are fine; they do not disqualify you. If you lose your HDHP coverage or turn 65 and enroll in Medicare, you can no longer contribute to the HSA, though you can keep the account and withdraw money for medical expenses.

Key Takeaways

  • Your health insurance must be a high-deductible plan with a deductible of at least $1,600 (individual) or $3,200 (family) in 2024 to open an HSA.
  • You cannot be enrolled in Medicare, claimed as a dependent, or covered by another health plan at the same time you contribute to an HSA.
  • If you work for an employer offering an HDHP, there are no income limits; self-employed people must check IRS thresholds for their filing status.
  • You open an HSA through a bank, credit union, or financial institution — not through your employer or the government — and can choose where to hold it.

Where to open an HSA account

You open an HSA at a bank, credit union, or investment firm — not through your employer or a government office. Your employer may offer a payroll deduction option that makes contributions easier, but you are not required to use their provider. You can shop around and open an account at any institution that offers HSAs.

Common providers include major banks (Chase, Bank of America, Wells Fargo), online banks (Fidelity, Lively, HealthEquity), and credit unions. Each charges different fees — some waive monthly maintenance fees if you keep a minimum balance, others charge $2 to $5 per month regardless. Some offer investment options for money you do not spend immediately; others keep funds in a savings account earning minimal interest. Compare fee structures and investment choices before you choose.

When you open the account, you will need to provide proof that you are enrolled in an HDHP. Your health insurance company sends you a notice of coverage or summary of benefits that shows your deductible amount — bring that document. The HSA provider will verify your HDHP status before the account is active.

How much you can contribute each year

The IRS sets annual contribution limits, and they increase most years. For 2024, you can contribute up to $4,150 if you have individual HDHP coverage, or $8,300 if you have family coverage. If you are 55 or older, you can add an extra $1,000 per year (called a catch-up contribution). These limits reset on January 1 each year.

You can contribute the full year's limit at any time during the year, or spread contributions across months — it does not matter. If you enroll in an HDHP partway through the year, you can still contribute the full annual limit, but you must follow the "testing period" rule: you must stay enrolled in the HDHP through December 31 of the following year, or you may owe taxes and penalties on the excess contribution. If you leave your HDHP before that date, talk to a tax professional about your options.

If your employer offers payroll deduction, contributions come out before taxes, which lowers your taxable income. If you contribute on your own, you deduct the contribution on your tax return (Form 1040, Schedule 1). Either way, the money goes in tax-free.

What happens after you open the account

Once your account is open, you receive a debit card or checkbook to pay for medical expenses directly from the HSA. You can also request a reimbursement check or transfer money to your personal bank account. Keep receipts for all medical expenses you pay with HSA funds — the IRS does not require you to submit them when you file taxes, but you must keep them in case of an audit.

Money you do not spend in a given year rolls over to the next year. Unlike a flexible spending account (FSA), there is no "use it or lose it" rule. Your HSA balance can grow indefinitely, and you can invest it in stocks, bonds, or mutual funds through most providers. This makes an HSA a long-term retirement savings tool, not just a way to pay this year's medical bills.

You can withdraw money for any reason at any time, but withdrawals for non-medical expenses are taxed as income and subject to a 20% penalty (unless you are 65 or older, in which case only income tax applies). Medical expenses that count include doctor visits, prescriptions, dental work, vision care, mental health treatment, and many other services. The IRS publishes a full list of may have access to medical expenses on its website.

Changing or closing your HSA

You can move your HSA to a different provider at any time — this is called a trustee-to-trustee transfer. The money moves directly from one institution to another without touching your hands, so there are no tax consequences. Some providers charge a transfer fee ($25 to $50), but many waive it. Request the transfer in writing and allow two to four weeks for it to complete.

You can also withdraw money yourself and deposit it into a new HSA within 60 days — this is called a rollover. If the money does not reach the new account within 60 days, it counts as a taxable withdrawal. Trustee-to-trustee transfers are safer because the institution handles the timing.

If you close your HSA, you can withdraw all remaining funds without penalty, but any non-medical withdrawals are taxed as income. You do not have to close the account when you leave your job or change health plans — you can keep it open indefinitely as long as you are not contributing new money while you lack HDHP coverage.

What disqualifies you from opening or contributing

You cannot open or contribute to an HSA if you are enrolled in Medicare, even if you also have an HDHP. Once you turn 65 and enroll in Medicare Part A, you must stop making contributions. You can keep the account and withdraw money for medical expenses, but new contributions are not allowed.

You also cannot contribute if you are claimed as a dependent on someone else's tax return — typically this means you are a student or adult child living with parents who pay your expenses. If you are unsure whether you can be claimed, ask the person filing the tax return or consult a tax professional.

Having other health coverage disqualifies you. This includes a spouse's employer plan, a parent's plan, or a separate medical plan. Dental-only, vision-only, and accident/disability plans do not count as disqualifying coverage. If you are unsure whether your coverage overlaps, call your health insurance company and ask whether you can have an HSA at the same time.

Frequently Asked Questions

What if my employer does not offer an HDHP?

You can purchase an individual HDHP through the health insurance marketplace (Healthcare.gov or your state's exchange) and open an HSA on your own. You will pay the full premium yourself rather than splitting it with an employer, but you still get the tax benefits of the HSA. Shop for plans that meet the IRS deductible minimums.

Can I open an HSA if I am self-employed?

Yes, if you have an HDHP and your self-employment income is below the IRS limit for your filing status. The limits change yearly — for 2024, check the IRS website or ask a tax professional. You can purchase an HDHP through the marketplace and open an HSA at any bank or investment firm.

Do I have to use my employer's HSA provider?

No. Your employer may offer payroll deduction through a specific provider, which makes contributions automatic, but you can open an HSA anywhere. If you choose a different provider, you will need to contribute on your own or ask your employer's payroll department whether they can direct deposits to an outside account.

What if I open an HSA but then lose my HDHP coverage?

You can keep the account and withdraw money for medical expenses without penalty. You just cannot make new contributions while you lack HDHP coverage. If you re-enroll in an HDHP later, you can resume contributions in the month you enroll.

Can I have an HSA and an FSA at the same time?

No. A limited-purpose FSA (which covers only dental, vision, and dependent care) is allowed alongside an HSA, but a general medical FSA is not. If your employer offers both, you must choose one or the other for medical expenses.