What Is a Health Savings Account (HSA)? The Complete Guide

Key takeaways

A health savings account (HSA) is a tax-advantaged account that lets you save pre-tax dollars for qualified medical, dental, and vision expenses.
To open and contribute to an HSA, you must be enrolled in a qualifying high-deductible health plan (HDHP).
HSAs offer a triple tax advantage: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified expenses are tax-free.
Unlike a flexible spending account (FSA), an HSA rolls over year to year and is yours to keep even if you change jobs or health plans.
For 2026, the IRS contribution limits are $4,400 for self-only coverage and $8,750 for family coverage, per IRS Revenue Procedure 2025-19.

The average American family spends over $6,000 per year on out-of-pocket healthcare costs, according to KFF Health System Tracker. For many Missouri households, that number arrives without warning. A health savings account, or HSA, is one of the most effective tools available for managing those costs while building real tax savings at the same time.

This guide explains what a health savings account is, how it works, who qualifies, what you can spend it on, and how it compares to a flexible spending account. If you have a high-deductible health plan and have not yet opened an HSA, you may be leaving meaningful tax benefits on the table.

What is a health savings account (HSA)?

A health savings account is a tax-advantaged deposit account designed to help people with high-deductible health plans (HDHPs) save for qualified medical expenses. You contribute pre-tax dollars, the funds grow tax-free, and withdrawals are tax-free as long as you use them for eligible healthcare costs.

HSAs are often described as having a triple tax advantage: your contributions reduce your taxable income, any interest or investment growth in the account is not taxed, and money spent on qualified medical expenses comes out tax-free. No other common savings vehicle offers all three benefits simultaneously.

The account belongs to you, not your employer or insurer. That means it goes with you if you change jobs, switch health plans, or move to a different state. For Missouri residents looking for a straightforward way to manage healthcare costs, a health savings account in Missouri works the same as anywhere else in the country; federal rules govern HSAs uniformly.

How does a health savings account work?

Opening an HSA is straightforward. You choose an HSA-eligible bank or financial institution, make an opening deposit, and begin contributing. At FSCB, the Health Savings Account requires just $50 to open, making it one of the most accessible options available.

Once your account is open, you can contribute funds throughout the year up to the IRS annual limit. Contributions can come from you directly, through payroll deductions, or from your employer. All contributions from every source count toward the same annual cap.

When a qualified medical expense comes up, you withdraw from the account to pay for it. Many HSA accounts come with a debit card for direct payment. Any funds you do not spend stay in the account, earn interest, and carry over to the next year. There is no deadline to use the money.

Who is eligible for a health savings account?

To contribute to an HSA, you must meet all of the following criteria:

Enrolled in a qualifying HDHP: For 2026, your plan must have a minimum annual deductible of $1,700 for self-only coverage or $3,400 for family coverage, and an out-of-pocket maximum no greater than $8,500 (self-only) or $17,000 (family), per IRS Revenue Procedure 2025-19.
Not enrolled in Medicare: Once you enroll in Medicare, you can no longer contribute to an HSA, though you can still use existing funds.
Not claimed as a dependent: You cannot contribute to an HSA if someone else claims you as a dependent on their tax return.
No other disqualifying coverage: Having a general-purpose FSA through a spouse's employer, or other non-HDHP health coverage, can make you ineligible.

If you are unsure whether your health plan qualifies, check with your HR department or health insurance provider. You can also ask an FSCB banker, and we will help you determine your next steps.

What expenses can you pay for with an HSA?

The IRS defines qualified medical expenses broadly. Your HSA funds can cover a wide range of costs that standard health insurance may not fully address:

Doctor visits, specialist appointments, and urgent care
Prescription medications and some over-the-counter drugs
Dental care, including cleanings, fillings, and orthodontia
Vision care, including eye exams, glasses, and contact lenses
Mental health services, including therapy and psychiatric care
Medical equipment such as blood pressure monitors or CPAP machines
Certain long-term care insurance premiums

For a full list, IRS Publication 502 outlines all eligible medical and dental expenses. Using HSA funds for non-qualified expenses before age 65 results in income tax plus a 20% penalty. After age 65, you can withdraw for any purpose, though non-medical withdrawals are subject to ordinary income tax.

Health savings account vs. flexible spending account (FSA): what is the difference?

Both accounts help you pay for medical expenses with pre-tax dollars, but there are important differences:

Rollover: HSA funds roll over every year with no limit. FSA funds are generally subject to a "use it or lose it" rule, with at most a limited carryover permitted by the employer.
Portability: An HSA belongs to you permanently. An FSA is tied to your employer, and you typically lose it if you leave your job.
Contribution limits: For 2026, HSA limits are $4,400 (self-only) or $8,750 (family). FSA contribution limits are set separately and are typically lower.
Eligibility: An HSA requires HDHP coverage. An FSA is available with most employer-sponsored health plans.
Investment growth: HSA balances can earn interest or be invested for long-term growth. FSA balances typically do not.

For people with HDHPs who can plan ahead, an HSA is generally the stronger long-term tool. The ability to carry a growing balance forward, year after year, turns your HSA into a dedicated healthcare reserve that keeps compounding over time.

The tax benefits of a health savings account

The tax advantages of an HSA are hard to match. Here is how each of the three benefits works:

Contributions reduce your taxable income. If you contribute $4,400 to your HSA in 2026 and you are in the 22% federal tax bracket, you could reduce your federal tax bill by roughly $968. Contributions made through payroll deductions also avoid FICA taxes, saving an additional 7.65%.

Earnings grow tax-free. Any interest your HSA balance earns is not subject to federal income tax, regardless of how long it accumulates. This makes an HSA a useful long-term savings vehicle for future healthcare costs.

Withdrawals for qualified expenses are tax-free. When you pay for a qualified medical, dental, or vision expense with HSA funds, that withdrawal does not count as income. You pay nothing extra in taxes on money spent for eligible healthcare.

According to Fidelity, a single 65-year-old retiring in 2024 could expect to spend an average of $165,000 on healthcare through retirement. An HSA, built up steadily over working years, is one of the most tax-efficient ways to prepare for those costs.

How to open a health savings account with FSCB

FSCB offers a Health Savings Account with a $50 opening deposit, making it easy to get started without a large upfront commitment. The account earns interest on your balance and funds roll over from year to year with no expiration.

To keep your account fee-free, maintain an average daily ledger balance of $1,000 or more to avoid the $2.00 monthly service charge, and enroll in electronic statements to avoid the $3.00 monthly paper statement fee.

The account also includes Mastercard ID Theft Protection and Money Management tools to help you track your spending and stay on top of your financial habits. Stop by any FSCB branch to open your account. Bring a valid government-issued ID and your Social Security number.

If you have a high-deductible health plan and have not yet opened an HSA, the next open enrollment period or a qualifying life event is the right time to start. The earlier you open the account, the more time your balance has to grow.

Learn more about FSCB's Health Savings Account or find your nearest Missouri branch to open one today.

Frequently Asked Questions

Can I use my HSA for non-medical expenses?

Yes, but the tax consequences depend on your age. Before age 65, using HSA funds for non-qualified expenses triggers ordinary income tax plus a 20% penalty. After age 65, you can withdraw for any reason and only pay ordinary income tax, with no penalty. The account effectively becomes similar to a traditional IRA for non-medical spending once you reach Medicare age.

What happens to my HSA if I change jobs or health plans?

Your HSA stays with you. Because the account belongs to you personally and not to your employer, you keep it regardless of where you work or what health plan you carry. If you switch to a non-HDHP plan, you can no longer make new contributions, but you can continue to use the existing balance for qualified expenses.

Does an HSA roll over year to year?

Yes. Any unused HSA balance carries over to the next year automatically with no limit. FSCB's Health Savings Account is not a use-it-or-lose-it account. Funds accumulate as long as the account is open, which makes an HSA a practical long-term savings tool for future healthcare needs.

Can I use my HSA for my spouse or dependents?

Yes. IRS rules allow you to use HSA funds for qualified medical expenses incurred by you, your spouse, and any dependents you claim on your federal tax return. Your spouse and dependents do not need to be covered by your HDHP for you to use HSA funds on their behalf.

What are the HSA contribution limits for 2026?

According to IRS Revenue Procedure 2025-19, the 2026 HSA contribution limits are $4,400 for self-only HDHP coverage and $8,750 for family coverage. Individuals age 55 or older who are not yet enrolled in Medicare may contribute an additional $1,000 as a catch-up contribution. These limits include all contributions from all sources, including any amounts your employer contributes on your behalf.