Health care costs keep climbing. Many Ohio families want a way to set money aside for doctor visits, prescriptions, and the bills that follow a hospital stay. A Health Savings Account, or HSA, gives people with a high deductible health plan a tax-friendly way to do that.
This guide breaks down how health savings accounts work in plain English, no jargon.
You’ll see how money goes in and out, who qualifies, the 2026 contribution limits, and what happens at age 65. At 1st National Bank, we help Ohio families open HSAs in person at any of our seven branches.
Key Takeaways
- An HSA uses pre-tax dollars for qualified medical expenses, but only if you are enrolled in a high-deductible health plan.
- For 2026: $4,400 (self-only), $8,750 (family), plus $1,000 catch-up at age 55+.
- HSA funds roll over forever, the account follows you across jobs, and it doubles as retirement savings after age 65.
What Is a Health Savings Account?
A health savings account (HSA) is a tax-advantaged account that helps you save and pay for qualified medical expenses. The IRS authorizes HSAs under Section 223 of the Internal Revenue Code. You can open one only with a qualifying high-deductible health plan, or HDHP. The point: give people on HDHPs a tax-friendly way to handle out-of-pocket medical costs.
HSAs come with three tax benefits, sometimes called the triple tax advantage:
- Your contributions go in pre-tax or are deductible at tax time
- The money in your HSA grows tax-free
- Withdrawals are tax-free when used for qualified medical expenses
The IRS lays out the full rule set in Publication 969.
How Health Savings Accounts Work
Once you have an HSA, how a health savings account works is fairly simple. The account moves through three steps:
- Money in: You fund the account pre-tax.
- Money out: You spend the money on qualified medical expenses without paying income tax.
- Money that stays for later: Anything you don’t spend rolls into the next year.
Step 1: Open and Fund Your HSA
You, your employer, or a family member can contribute to your HSA. Most people fund it in two ways:
- Payroll deduction: Your employer pulls a set amount from each paycheck before federal income tax is calculated, lowering your taxable income for the year.
- Direct transfer from your checking account: You write it off on your federal tax return when you file. At 1st National Bank, you can open and fund an HSA at any branch.
Step 2: Pay for Qualified Medical Expenses
Using your HSA funds to pay for qualified expenses is straightforward. You can swipe your HSA debit card at the doctor, pharmacy, or dental clinic. You can also pay out-of-pocket and reimburse yourself later. Withdrawals for qualified medical expenses are tax-free.
Common qualified medical expenses include:
- Doctor visits and copays
- Prescription medications
- Dental and vision care
- Mental health services
Non-qualified withdrawals are taxed and may bring a 20% penalty if you’re under 65. IRS Publication 502 has the full list.
Step 3: Save or Invest the Unused Balance
HSAs are not use-it-or-lose-it. Every dollar left in the account at year-end rolls over. The HSA belongs to you, not your employer. That means even if you switch jobs or health plans, it goes with you.
Many providers let you invest HSA funds once your balance crosses a set threshold. Options vary by HSA administrator, so check with your provider before moving the money. People often treat their HSA as long-term savings for future medical expenses and expenses in retirement.
Who Is Eligible for a Health Savings Account?
To open an HSA, the IRS requires you to meet four rules. You must be:
- Enrolled in a qualifying high-deductible health plan
- Free from other disqualifying coverage, like a general-purpose flexible spending account
- Not enrolled in Medicare
- Not claimed as a tax dependent on someone else’s return
An HDHP is a health insurance plan with a higher deductible and lower premiums that meets IRS thresholds. Those limits shift each year, so check IRS.gov before signing up. Even if you lose HDHP coverage later, you still keep the money in your HSA, but you can’t add new contributions until you re-enroll in a qualifying plan.
HSA vs FSA: Key Differences
HSAs and flexible spending accounts get confused often. Both let you set aside pre-tax dollars for health care expenses, but they work differently. The main differences: who owns the account, what happens to unused money, and who can sign up.
| Feature | HSA | FSA |
| Ownership | You own it, even if you switch jobs | Employer owns it |
| Rollover | Unused funds roll over forever | Mostly use-it-or-lose-it each year |
| Eligibility | Requires qualifying HDHP | Requires employer offer |
| Who contributes | You, employer, or family | You and your employer |
If you have an HDHP and want long-term flexibility, the HSA is usually the better fit. Without an HDHP, an FSA may be your only option. For more, see our breakdown on HSA vs FSA.
HSA Contribution Limits for 2026
The IRS sets new HSA contribution limits each year. For 2026, you can contribute up to $4,400 with self-only HDHP coverage or $8,750 with family HDHP coverage. If you’re age 55 or older and not on Medicare, you can add a $1,000 catch-up contribution.
These limits apply to all contributions to your HSA combined, including anything your employer puts in. So if your employer contributes $1,200 to your self-only account, you can add up to $3,200 more (Source: IRS Revenue Procedure 2025-19).
What Happens to Your HSA After Age 65?
When you are age 65 or older, two things shift in how your HSA works:
- Non-qualified withdrawals no longer carry the 20% penalty, though they’re still subject to income tax
- Enrolling in Medicare ends your ability to make new HSA contributions
Withdrawing money for qualified medical expenses stays tax-free, just like before. You keep the account and the money in your HSA. Many people use funds in an HSA for Medicare premiums, long-term care insurance, and to pay medical expenses out-of-pocket in retirement. The HSA starts to work more like a retirement account. Talk to a tax advisor before making large withdrawals.
Open a Health Savings Account at 1st National Bank
HSAs sound complicated at first, but the three steps above cover most of what you need. You fund pre-tax, pay for qualified medical expenses tax-free, and let any unused money roll over.
At 1st National Bank, we make it easy to open an HSA in person. Stop by any of our seven Ohio branches in Centerville, Lebanon, Liberty Township, Maineville, Mason, or Morrow, or call 513-932-3221. Our HSAs come with no monthly fees, no minimum balance, and a free debit card. Member FDIC.
Frequently Asked Questions
Are HSA contributions tax-deductible?
Yes. Contributions you make directly from a checking account are tax-deductible on your federal income tax return, even if you don’t itemize. Contributions to an HSA made through payroll deduction are taken out pre-tax, which lowers your taxable income another way. See IRS Publication 969 for the full breakdown.
Can I keep my HSA if I switch jobs or health plans?
Yes. The HSA belongs to you, not your employer. The money stays in your account no matter where you work. You can keep using HSA funds to cover qualified medical expenses anytime. The catch: new contributions are only allowed while you’re enrolled in a qualifying high-deductible health plan.
Do unused HSA funds roll over year after year?
Yes. Unlike a flexible spending account, every dollar rolls over forever. There’s no deadline to spend it. Funds can sit and earn interest or be invested with some HSA providers. The HSA covers both current and future health expenses.
What happens if I use HSA funds for non-qualified medical expenses?
Two things. If you use HSA funds for non-medical expenses, the amount withdrawn gets added to your taxable income, so you pay federal income tax on it. Under age 65, the IRS also tacks on a 20% additional tax. Once you turn 65, the 20% penalty goes away, but income tax still applies. The rule is in IRS Publication 969. Save your receipts.
Can I have an HSA without a high-deductible health plan?
No. The IRS requires you to be enrolled in a qualifying high-deductible health plan to open or be eligible to contribute to an HSA. If you lose HDHP coverage later, you keep the account and the money, but you can’t add new contributions until you re-enroll.
Can I use my HSA to pay for my spouse and children?
Yes. You can use HSA funds for qualified medical expenses for your spouse and any tax dependents, even if they aren’t on your HDHP. The list of qualified expenses is in IRS Publication 502.
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1st National Bank provides this information for educational purposes only. Tax rules and HSA regulations are updated over time. Talk to a qualified tax advisor for advice specific to your situation. Member FDIC. Equal Housing Lender.