A health savings account (HSA) allows a taxpayer to pay for medical expenses with tax free dollars. In order to qualify for an HSA a taxpayer must be enrolled in a high-deductible health care plan. You can read more about health savings accounts at:

https://magdaabdogomezlaw.com/a-health-savings-account-as-a-retirement-tool/

The tax act signed on July 4, 2025 made three changes expanding the availability of HSAs. These are:

1. Telehealth and Remote Services: The CARES act allowed high-deductible health plans to provide access to telehealth and remote services without having to meet a deductible. Subsequent legislation extended this provision in the CARES act through December 31, 2024. The new act has made the right to receive telehealth and remote services permanent. The law applies to plans beginning on January 1, 2025. Taxpayers have the right to receive these types of services before meeting the deductible and remain eligible to make contributions to the HSA.

2. Bronze and Catastrophic Plans: Beginning January 1, 2026 bronze and catastrophic coverage health plans available through an exchange are considered to be HSA compatible even though they do not meet the definition of a high-deductible health plan. Taxpayers enrolled in these plans will be able to contribute to an HSA. The IRS issued clarification in December 2025 that taxpayers do not have to purchase these plans through an exchange to qualify for HSA eligibility.

3. Direct Primary Care Service Agreements: These types of plans typically charge a fixed periodic fee and provide certain primary care services. Since these types of plans provide services without a deductible having been met, a taxpayer who participates in such a plan would not be able to qualify for the HSA due to the existence of a health plan which providea coverage prior to the satisfaction of the yearly deductible. The new act has made an exception for these types of plans. Beginning January 1, 2026 a taxpayer who participates in a direct primary care service arrangement, but is otherwise eligible, may contribute to an HSA so long as the periodic fee paid for the plan does not exceed $150 month or $300 if the plan covers more than one person. Further, the periodic fees can be paid with tax free dollars from the HSA.

For more detailed information on the changes refer to: https://www.irs.gov/pub/irs-drop/n-26-05.pdf

Now is the time to determine if these changes allow you to qualify for an HSA. In order to qualify for an HSA:

• You must be enrolled in a high deductible plan. For 2026 a high deductible plan is one that has an annual deductible of $1,700 (individual) or $3,400 (family) and in which the out of pocket maximum, including the deductible, does not exceed $8,500 (individual) or $17,000 (family). Contributions to an HSA are tax deductible.
• You are not enrolled in a health plan unless it is a qualified HSA plan. This is where the above changes can make a difference in eligibility.
• You are not enrolled in Medicare.
• You are not enrolled in a general purpose health care flexible spending account.
• You are not claimed as a dependent on someone else’s return.

There are several benefits to having an HSA.

• Contributions to an HSA are tax deductible, even if you do not itemize deductions, unless the contribution is made with pre-tax dollars.
• Contributions made by your employer to your HSA are not included in your income.
• You can contribute to an HSA even if you have no earned income.
• Funds in an HSA can be invested in any IRA-approved investment. Any income earned by the HSA is not taxable.
• There are no required minimum distributions from an HSA. This allows the fund to grow so that as you age you will have more funds available for the payment of medical expenses.
• Distributions from an HSA are not taxable income since they are being used to pay eligible medical expenses. Long term care is an eligible medical expense.

If you qualify for an HSA you may contribute up to $4,400 (individual) or $8,800 (family) to the plan in 2026. Those who are 55 or older may contribute an additional $1,000 as a catchup contribution. Contributions for 2025 can be made until April 15, 2026. Note that there are no extensions for the contribution deadline date.