HSA Account Rules: Contribution Limits, Penalties, and Age 65

HSA rules and contribution limits come down to a short checklist: you can contribute only if you’re covered by a qualifying High Deductible Health Plan and nothing else that pays for medical care before the deductible, and for 2026 the cap is $4,400 with self-only coverage or $8,750 with family coverage, plus a $1,000 catch-up if you’re 55 or older. Break the eligibility rules or spend the money on something non-medical and the IRS takes a piece back, sometimes a big piece.

Who Can Contribute

Four conditions have to be true on the first day of any month for you to be an eligible HSA contributor for that month.¹

You need coverage under a High Deductible Health Plan. For 2026, the plan has to carry an annual deductible of at least $1,700 for self-only coverage or $3,400 for family coverage, and its out-of-pocket maximum (deductibles, copays, and coinsurance, but not premiums) can’t exceed $8,500 for self-only or $17,000 for family.²

You can’t have other coverage that pays for medical care before your HDHP deductible is met. A general-purpose Flexible Spending Account is disqualifying because it reimburses from the first dollar. A limited-purpose FSA covering only dental and vision, or a post-deductible FSA that turns on after you meet the HDHP minimum, does not block eligibility.

You can’t be enrolled in Medicare. The month you become entitled to Medicare, your contribution limit drops to zero for that month and every month after.

And no one else can claim you as a dependent on their return.¹

2026 Contribution Limits

The IRS adjusts the caps yearly for inflation. For 2026:²

Self-only HDHP coverage: $4,400
Family HDHP coverage: $8,750
Catch-up contribution at age 55 or older: an additional $1,000

These caps cover everything going in. Your own deposits, employer contributions, and any deposits from a family member all count against the same number. The $1,000 catch-up is set by statute and doesn’t move with inflation.

Married Couples

When both spouses are HSA-eligible and either spouse holds family HDHP coverage, the $8,750 family limit applies to the couple together. They can split it between their individual HSAs however they want; if they don’t agree on a split, the IRS requires equal division.³ Each spouse who is 55 or older adds their own $1,000 catch-up to their own account, so a couple where both are 55-plus can contribute up to $10,750 total.

Mid-Year Eligibility

If you aren’t eligible for the full year, your limit is generally reduced by one-twelfth for each ineligible month. Enroll in an HDHP on March 1 and stay covered through December, and you get 10/12 of the annual cap.

The last-month rule bends this. If you’re eligible on December 1, the IRS treats you as eligible for the whole year, letting you contribute the full annual amount. The condition: you have to stay HSA-eligible through December 31 of the following year. Drop your HDHP during that testing period for any reason other than death or disability, and the excess gets pulled into your taxable income and hit with an additional 10% tax.⁴

When Contributions Are Due

You have until the federal tax filing deadline to make contributions for the prior year. For tax year 2026, that means April 15, 2027.⁴

What You Can Spend the Money On

Withdrawals are tax-free when used for qualified medical expenses under IRS rules. The category is broad:⁵

Doctor and hospital costs, including copayments and deductibles
Dental and vision care, including eyeglasses and contact lenses
Prescription drugs and insulin
Over-the-counter medicines and menstrual care products, no prescription needed since the CARES Act⁶
Mental health services and long-term care

There’s no deadline for reimbursing yourself. Pay for a root canal in 2026, and you can pull money out of the HSA to cover it ten years later, as long as the expense was incurred after you opened the account. Save the receipts. California and New Jersey don’t follow the federal HSA tax treatment at the state level, so residents there still owe state tax on contributions and may owe state tax on the account’s earnings.

Penalty for Non-Qualified Withdrawals

Take money out for anything that isn’t a qualified medical expense and two things happen. The amount is added to your taxable income for the year, and you owe an additional 20% penalty on top.¹ On a $1,000 non-qualified withdrawal, someone in the 22% federal bracket loses $220 to income tax plus $200 to the penalty, keeping $580.

The 20% penalty drops off in three situations: you turn 65, you become disabled, or you die. After 65, non-qualified withdrawals are still taxed as ordinary income, but the penalty is gone, and the account effectively functions like a traditional IRA for non-medical spending.¹

Penalty for Contributing Too Much

Go over the annual cap and the IRS charges a 6% excise tax on the excess for every year it sits in the account uncorrected.⁷ This is easier to trigger than people think. Change jobs mid-year and have two employers both contribute, or switch between self-only and family coverage, and the math can quietly go over.

To fix it, withdraw the extra amount, plus any earnings on that amount, before your tax filing deadline (including extensions). The withdrawn earnings are taxable, but you avoid the 6% penalty. Miss that deadline and you can absorb the excess in a later year where you contribute below the cap, but you owe 6% for each year the excess stayed in the account.¹

What Changes at 65

Medicare enrollment ends new HSA contributions. Most people become entitled to Medicare Part A at 65 whether they actively sign up or not, so the contribution cutoff often arrives on its own. Keeping the ability to contribute past 65 requires delaying Medicare enrollment entirely, which typically only makes sense with active employer coverage.

The balance you already have stays fully usable. Withdrawals for qualified medical expenses remain tax-free for life, and the qualified list actually expands after 65 to include premiums for Medicare Part A, Part B, Part D, and Medicare Advantage plans. Medigap (Medicare supplement) premiums are specifically excluded and do not qualify for tax-free treatment.¹

Reporting on Your Tax Return

Contribute to or take any distribution from an HSA during the year and you must file IRS Form 8889 with your return, even if you’d otherwise have no filing requirement.⁸ Form 8889 is where you report contributions, calculate your deduction, and account for distributions.

Your HSA custodian sends two forms each year: Form 5498-SA reports contributions to the account, and Form 1099-SA reports distributions.⁹ The IRS doesn’t want your receipts attached to the return, but keep them. If a distribution ever gets questioned, the burden is on you to show the money went to qualified medical expenses.

1
Office of the Law Revision Counsel. 26 U.S. Code 223 – Health Savings Accounts
2
Internal Revenue Service. Rev. Proc. 2025-19 – 2026 Inflation Adjusted Amounts for Health Savings Accounts
3
Internal Revenue Service. IRS VITA – HSA Contribution Limits for Married Individuals
4
Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
5
Internal Revenue Service. Frequently Asked Questions About Medical Expenses Related to Nutrition, Wellness and General Health
6
Internal Revenue Service. IRS Outlines Changes to Health Care Spending Available Under CARES Act
7
Office of the Law Revision Counsel. 26 U.S. Code 4973 – Tax on Excess Contributions
8
Internal Revenue Service. Instructions for Form 8889 – Health Savings Accounts
9
Internal Revenue Service. About Form 5498-SA – HSA, Archer MSA, or Medicare Advantage MSA Information