I'm the type of person who really does not mind working hard. You know what I do mind? Paying taxes.
Of course, I realize that to some degree, taxes are inevitable. But I try my best to minimize my tax burden whenever possible.
Image source: Getty Images.
To that end, I make a point to max out contributions to my 401(k) plan every year. And in the past, when I didn't have a 401(k), I would fund an IRA.
But there's a lesser-known savings account that offers ample opportunities to shield income from taxes. It's called an HSA, or health savings account. And while it isn't a retirement plan per se, it can certainly function as one.
In 2026, HSA limits are going to increase. And if you qualify for one of these accounts, it pays to max out your contributions if you can.
Why HSAs make a lot of sense
If you're not super familiar with HSAs, they're a sort of hybrid savings and investment account. You can take HSA withdrawals at any time to pay for qualifying healthcare expenses. But you're also not forced to spend your HSA balance year after year, which is part of what makes these accounts so valuable.
In fact, HSAs let you invest money you aren't withdrawing right away. That means you can grow your balance into a larger sum by sitting back and doing nothing (other than choosing investments, of course).
The reason HSAs are so awesome is that they offer three distinct tax breaks:
- Contributions go in tax-free.
- Investment gains are tax-free.
- Withdrawals are tax-free when used to pay for qualifying healthcare expenses.
If you're eligible for one of these accounts, it absolutely pays to participate -- and max out if you can.
HSA limits are going up
As is the case with other tax-advantaged savings plans, HSA limits commonly rise from year to year. And in 2026, they're increasing.
In 2026, HSAs will max out as follows:
- $4,400 for self-only coverage.
- $5,400 for self-only coverage if you're 55 or older.
- $8,750 for family coverage.
- $9,750 for family coverage if you're 55 or older.
To qualify for that extra $1,000 contribution in either category, you need to turn 55 by Dec. 31, 2026. Even if you're younger at the start of the year, you can still contribute the larger amount.
Of course, not everyone can afford to contribute the maximum amount to an HSA. But you should know that many employers help fund these accounts, especially if the only health plan they offer is one with a high deductible. Check your workplace benefits to make sure you aren't missing out on that free money by opting out of an HSA.
You may qualify for an HSA in 2026 -- even if you never did before
One big drawback of HSAs is that not every health insurance plan is eligible for one. In 2026, your plan qualifies if:
- It has a minimum deductible of $1,700 for self-only coverage or $3,400 for family coverage.
- It has an out-of-pocket maximum of $8,500 for self-only coverage or $17,000 for family coverage.
Even if you previously weren't eligible for an HSA, it pays to check your eligibility for 2026 especially if you're switching health plans. Along these lines, you can't assume that you're able to participate in an HSA in 2026 simply because you were eligible before.
Remember, your plan has to meet the criteria for both the minimum deductible and the out-of-pocket maximum. But if you're able to both participate and max out your HSA in 2026, you really should. Not only will that allow you to shield more income from taxes, but if you're able to leave your HSA untapped for a good number of years, you can grow your balance into a larger sum.
I, for better or worse, cannot contribute to an HSA in 2026, since my health plan is no longer eligible. On the plus side, it means I no longer have a brutal deductible to meet.
But you can bet that I'm doing my best to avoid touching my existing HSA for as long as possible. I want that money to grow tax-free all the way into retirement, since it's common for healthcare costs to increase at that stage of life.
Plus, like I said earlier, I enjoy getting tax breaks. So the way I see it, the more time I give my HSA to grow tax-free, the more I get to benefit. Take that, IRS.
