Health Savings Account

Health Savings Accounts

A Health Savings Account (HSA) is a tax-exempt account established for High Deductible Health Plan (HDHP) holders exclusively for the purpose of paying qualified medical expenses.

Anyone who has a High Deductible Health Plan (HDHP) is eligible for an HSA, regardless of his or her age or income bracket. The individual:

  • Must be covered by a high deductible health insurance plan
  • Have no other first dollar medical coverage
  • Cannot be claimed as a dependent on another person’s tax return
  • Cannot be enrolled in Medicare*

*For more information, contact your health insurance provider or benefits administrator.

What is a Health Savings Account?

  • A Health Savings Account (HSA) is a tax-exempt account into which holders of a High Deductible Health Plan (HDHP) make contributions for the purpose of paying qualified medical expenses.
  • A Health Savings Account works in conjunction with High Deductible Health Plans (HDHP) by providing policy holders a vehicle to deposit tax-free funds that can be used to cover qualifying medical costs not covered under the health plan. A high deductible health plan (HDHP) contains certain requirements with respect to deductibles and out-of-pocket expenses.
  • You can use these tax-free dollars to pay for medical expenses covered under you HDHP until you have met your deductible. The insurance company pays medical expenses above your deductible, except for any co-insurance costs with tax-free money from your HSA. In addition, you can use tax-free dollars for qualified medical expenses not covered by the HDHP, such as dental, vision and alternative medicines.
  • Funds remaining in your account at year-end are yours to rollover and accumulate for future healthcare expenses.

What are Qualified Medical Expenses?

Consumers can use their money in their HSA to pay for many types of medical expenses, even some that are excluded from their insurance plans. Some examples of qualified medical expenses are:

  • Vision Care
  • Dental Services
  • Orthodontics
  • X-rays
  • Contact Lenses
  • Hearing Aids
  • And Much More!

More detailed information about qualified expenses can be found in the IRS publication: Publication 502 (2020), Medical and Dental Expenses | Internal Revenue Service (

Health Savings Accounts Tax Advantages

There are four tax advantages unique to HSA accounts:

  1. Contributions to HSAs are deductible to you, regardless of the source.
  2. Interest or investment gain on the account isn’t subject to tax.
  3. Funds can be withdrawn to pay for qualified medical expenses without being taxed.
  4. After the age of 65, you can withdraw funds for non-medical expenses without being subject to a penalty (however, they will be subject to income tax).

*Individuals should consult with their individual tax advisors with specific tax questions.

Health Savings Account 2023 & 2024 Annual Contribution Limits

Contribution Year


Annual Contribution Limit

Catch up Contribution at Age 55 and Older


Single Coverage




Family Coverage




Single Coverage




Family Coverage



What is the Value of a Health Savings Account?

  1. Control: An Health Savings Account gives you more control over how you plan and spend your healthcare dollars.
  2. Portability: An Health Savings Account is owned by you, the individual, and is completely portable. Funds remain with you even if you change jobs, change medical coverage, become unemployed, move, or change your marital status.
  3. Flexibility: There are no "use it or lose it" rules. Health Savings Account funds remain in your account from year to year. Even if you are no longer eligible to make contributions, funds may still be used to pay for qualified medical expenses, tax-free.
  4. Ability to Save for Future Medical Needs: Unused funds from your Health Savings Account can grow through interest and investment earnings and can be banked for future medical expenses.

Special Tip

HSA Tip from Expert

– Rita Vaughn; NBT Bank Product / Service Manager

"What is a Catch-Up Contribution?"

Eligible individuals who are over the age 55 but under the age of 65 can make additional '"catch up" contributions to their Health Savings Account in addition to the annual contribution limit.

The current contribution limit for 2021 is $1,000 for both single and family coverage.

Did you know?

Did You Know?

At age of 65 you can withdraw funds from your health savings account for non-qualified medical expenses without a 20% penalty? However, the amounts withdrawn are taxable as ordinary income.