The Republican Party’s “big and beautiful” tax package, which passed through the house on Thursday, is a provision that expands the health savings account (HSA) with the biggest donation increase and other benefits next year.
Learn more: What is Health Savings Account (HSA)?
Kaye L. Pestaina spoke to Yahoo Finance by Kaye L. Pestaina on patients and consumer protection.
HSA can be an authentic way to increase savings for retirement, and is considered to be a tool for many financial planners, but it is designed to pay medical expenses, Pestaina said.
“This regulation aims to remove certain barriers that can double what can contribute to low -income people every year,” she said. “It’s good news, but in theory, you can save money by leaving this account to save money in the future, but you still need money.”
HSA provides a triple tax advantage. It is the only account that allows you to invest money based on duty -free basis, to build duty -free, and to provide tax exemption for qualified medical expenses. (In some states, the main tax is evaluated.)
To invest in HSA, you must register on the High Deductible Health Plan (HDHP). In this plan, you pay a lower premium per month than other types of health insurance plans, but annual deductions (the amount paid for medical expenses before insurance starts).
In 2025, this can deduct at least $ 1,650 for individual range and $ 3,300 for family insurance.
If you have a qualified high -deductible health plan, you can also open HSA as a self -employed freelancer or a business owner.
Some employers match donations to HSA similar to retirement savings accounts provided by employers. Your donation falls every year and must be maintained when you retire or change your employer.
A 20%fine will be imposed on the amount of withdrawals that are not used for qualified medical expenses, and the income tax is paid for disqualified amount.
If you are 65 or older, the penalty is gone, so you can only pay the income tax if it is not a qualified medical cost for all purposes.
The following is a summary of the provisions included in the law that will enter into force from January 2, 2026 if you sign the law.
1. Increased contribution. The 2025 donation limit of HSA is $ 4,300 for individuals and $ 8,550 for families. Individuals aged 55 or older can donate additional $ 1,000.
