2026 HSA Limits & FAQ Guide

If you have questions when it comes to Health Savings Accounts (HSAs), you’re not alone. HSAs come with significant benefits, including tax and cost savings. Understanding how HSAs work, and the rules that govern them, are a critical step for both you and your employees.

To start, we'll appease the HSA experts out there and cut right to the chase by providing the 2026 HSA limits. Then, we'll dive into other important HSA-related questions to ensure you're clear on the ins and outs of these popular pre-tax savings accounts.

1. What are the HSA limits for 2026?

Since HSAs have significant tax advantages, the IRS sets new contribution and out-of-pocket limits every year. These limits are adjusted for annual inflation, but the catch-up contribution amount doesn't usually change (the last time it was updated was 2010). The below chart summarizes the 2026 HSA limits, compared to the previous year.

2. What is an HSA?

Okay, let’s take a step back and talk basics. An HSA is a pre-tax savings account for individuals with High Deductible Health Plans (HDHPs). People with HSA plans can set aside pre-tax dollars to pay for out-of-pocket medical expenses. While HDHPs typically have lower monthly premiums, they have higher out-of-pocket medical fees than other insurance plans. Therefore, pairing an HDHP with an HSA helps to lower the financial cost for employees covered under a HDHP.

3. What expenses are covered by an HSA?

HSAs cover a wide range of medical expenses, including doctor visits, prescriptions, deductibles, medical equipment, health-related products, dental and vision care. Since HSAs are tax-deductible, the IRS defines which medical expenses are covered. For a comprehensive look at what's covered, review the most recent IRS publication and shop around at the HSA Store.

4. How does an HSA work?

If you’re an employer offering HDHP insurance coverage, you can set up pre-tax payroll deductions for your employees’ HSA contributions. This allows them to easily contribute a portion of each paycheck directly into their HSA accounts, which can be used to pay for qualified medical expenses. These contributions don’t count as taxable income, so it means immediate tax savings for employees.

5. Who can contribute to an HSA?

While employees technically own their HSA accounts, both employees and employers can make contributions. Family members or any other person can also make contributions on behalf of an eligible individual — these contributions just don't have the benefit of being pre-tax. If you’re an employer that’s making contributions, keep in mind that those count toward your employee’s HSA limit, so make sure the total combined contributions do not exceed the HSA limit established by the IRS.

6. What are the tax benefits of an HSA?

Contributions to an HSA are 100% deductible from federal gross income. If employees make withdrawals from the HSA for qualified medical expenses, they’re tax-free. HSAs also reduce employer payroll taxes. Win-win!

7. Can employees change their HSA contribution amount?

It depends on the plan. Some plans allow employees to start, stop or change their HSA contribution amounts throughout the plan year. Others do not. Check your plan, so you're prepared to answer employee questions regarding contribution changes.

8. What happens if employees put too much money in an HSA?

Employees must avoid this scenario at all costs. HSA contributions in excess of the IRS limits are not tax deductible. They’re also subject to a six percent excise tax, or a flat-rate tax that applies to goods, services and activities.

If your employees find themselves in this situation, there are two things they can do:

1. Remove the excess contributions before they file their federal income tax return. However, they’ll pay income taxes on the excess removed from their HSA.
2. Leave the excess contributions in their HSA and pay the six percent excise tax on excess contributions. If they go this route, they’ll likely want to reduce their contributions for the following year to make up for excess contributions.

If your employees are contributing to their HSA automatically through payroll deductions, it’s important to put safeguards in place to prevent them from over-contributing. A human capital management (HCM) technology like UKG Ready is a good safeguard, as it allows employers to set different rules in the system that would automatically cap HSA family and individual contributions at the required limits.

9. What happens to money in an HSA account at the end of the year?

With HSAs, there’s no “use it or lose it” policy — the money in an HSA account rolls over from year to year. Unused contributions will keep accumulating until employees need them, and even better, the balances earn interest. Employees can even choose to invest their HSA funds in stocks, mutual funds, bonds and more.

10. What are the advantages for an employer to offer an HSA?

Since HSAs are paired with HDHPs, they can result in significant savings for employers because HDHPs come with lower insurance premiums. Some employers may choose to contribute those savings to employees’ HSA plans, and those contributions are tax deductible.

We’re here to help.

HSAs can be complex, but with automatic payroll deductions and contribution caps in place, our human capital management (HCM) solution, UKG Ready, makes managing health insurance benefits easier. To find out more about how we can simplify and streamline your benefits and payroll processes, visit our website or request a live demo today.