Here's how to get a tax break on medical bills through an FSA or HSA, plus new 2025 HSA contribution limits.
Updated May 15, 2024 · 3 min read Written by Tina Orem Assistant Assigning Editor Tina Orem
Assistant Assigning Editor | Taxes, small business, Social Security and estate planning, home services
Tina Orem is an editor at NerdWallet. Prior to becoming an editor, she covered small business and taxes at NerdWallet. She has been a financial writer and editor for over 15 years, and she has a degree in finance, as well as a master's degree in journalism and a Master of Business Administration. Previously, she was a financial analyst and director of finance for several public and private companies. Tina's work has appeared in a variety of local and national media outlets.
Assigning Editor Pamela de la Fuente
Assigning Editor | Consumer Credit, Taxes, Retirement, Underrepresented communities, Debt
Pamela de la Fuente leads NerdWallet's consumer credit and debt team. Previously, she led taxes and retirement coverage at NerdWallet. She has been a writer and editor for more than 20 years.
Pamela joined NerdWallet after working at companies including Hallmark Cards, Sprint Corp. and The Kansas City Star.
She is a thought leader in content diversity, equity, inclusion and belonging, and finds ways to make every piece of content conversational and accessible to all.
She is a graduate of the Maynard Institute's Maynard 200 program, and was a presenter at the National Association of Black Journalists convention in 2023. She is a two-time winner of the Kansas City Association of Black Journalists' President's Award. She is also a founding co-chair of NerdWallet's Nerds of Color employee resource group.
Pamela is a firm believer in financial education and closing the generational wealth gap . She got into journalism to tell the kind of stories that change the world, in big and small ways. In her work at NerdWallet, she aims to do just that.
Fact Checked Co-written by Sabrina Parys Assistant Assigning Editor Sabrina Parys
Assistant Assigning Editor | Taxes, Investing
Sabrina Parys is an assistant assigning editor on the taxes and investing team at NerdWallet, where she manages and writes content on personal income taxes. Her previous experience includes five years as a copy editor and associate editor in academic and educational publishing. She is based in Brooklyn, New York.
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
Medical expenses can take a big bite out of your wallet. But two special accounts — the health savings account (HSA) and the health flexible spending account (FSA) — can be good remedies for both your doctor and tax bills.
As with all things tax, there are exceptions and special rules for certain situations.
Simple tax filing with a $50 flat fee for every scenario
With NerdWallet Taxes powered by Column Tax, registered NerdWallet members pay one fee, regardless of your tax situation. Plus, you'll get free support from tax experts. Sign up for access today.
Register Nowfor a NerdWallet account
Hassle-free tax filing* is $50 for all tax situations — no hidden costs or fees.Maximum refund guaranteed
Get every dollar you deserve* when you file with this tax product, powered by Column Tax. File up to 2x faster than traditional options.* Get your refund, and get on with your life.*guaranteed by Column Tax
A health savings account (HSA) is an account you can use to pay a variety of medical costs. An HSA is only available to people who have a high-deductible health insurance plan. The contributions to an HSA are tax-deductible, and the account's earnings (if invested) are tax-free, as are withdrawals for eligible medical expenses.
The maximum amount you can contribute to your HSA also depends on inflation, as well as the type of high-deductible insurance policy you have.
The IRS released new 2025 HSA contribution limits May 9. Maximums for both self and family coverage have increased. In 2025, people with an eligible individual high-deductible health plan can contribute up to $4,300 to an HSA. Family contributions are capped at $8,550.
Per the IRS, high-deductible health plans for 2025 must have an annual deductible of at least $1,650 for self coverage and $3,300 for family coverage to be considered eligible. Out-of-pocket expenses cannot exceed $8,300 (self) and $16,600 (family) [0]
Internal Revenue Service . Rev. Proc. 2024-25. Accessed May 15, 2024.Catch-up contribution (ages 55+)
Individuals can contribute up to $4,150 in 2024, up $300 from 2023. The family contribution amount for 2024 rose to $8,300, a $550 increase compared with 2023. The IRS raised the HSA contribution amounts more than usual for the 2024 calendar year due to inflation.
Per the IRS, a high-deductible health plan for the 2024 tax year must have an annual deductible of at least $1,600 for self coverage and $3,200 for family coverage. Out-of-pocket expenses cannot exceed $8,050 (self) or $16,100 (family) [0]
Internal Revenue Service . Rev. Proc. 2023-23. Accessed May 15, 2024.Catch-up contribution (ages 55+)
A health flexible spending account (FSA) is a workplace account you can use to pay for certain medical costs that come out of your own pocket, such as insurance copays, prescriptions and other items needed to meet your health policy's deductible. You contribute to the account as a payroll deduction from your salary, and in return the IRS agrees not to tax that portion of your salary.
Note: Some employers also offer dependent care flexible spending accounts (DCFSAs), which are different from health FSAs. DCFSAs can be used to help cover the cost of daycare, preschool and elder care.
The IRS establishes the maximum FSA contribution limit each year based on inflation. In 2024, the FSA contribution limit is $3,200, or roughly $266 a month.
Simple tax filing with a $50 flat fee for every scenario
With NerdWallet Taxes powered by Column Tax, registered NerdWallet members pay one fee, regardless of your tax situation. Plus, you'll get free support from tax experts. Sign up for access today.
Register Nowfor a NerdWallet account
Learn MoreIf your health savings account is based on a high-deductible health plan you get through work, your employer might set up payroll deductions on your account, meaning the money will go into your health savings account tax-free.
If you make HSA contributions directly, you may be able to claim a tax deduction for that amount when you file your tax return. You don't have to itemize to claim the HSA deduction.
If you're looking for a last-minute way to cut your tax bill, note this: You have until the annual tax filing deadline to put money into an HSA for the prior tax year.
Once you set up your flexible savings account at work, the contributions automatically come out of your paycheck and go into your account each pay period.
Good news: The money is contributed before tax, so your payroll tax bill should be a bit smaller.With an FSA, typically you either use a debit card tied to the account, or you pay out of pocket and then submit receipts to the FSA administrator so you can get reimbursed. Using an FSA debit card is usually easier, but remember that you may be asked to provide receipts to prove your purchases were eligible medical expenses.
With an HSA, you’ll probably receive a debit card linked to your HSA account. Along with other annual tax forms, your HSA manager will issue a Form 1099 -SA showing distributions from the account. Keep receipts and documentation of what you spent the money on, in case the IRS questions your tax deduction.
HSA money is yours — there are no deadlines to withdraw funds, even if you no longer have the same high-deductible health plan. You can even invest your HSA money in mutual funds or other securities, and the money can continue to grow tax-deferred and be used tax-free to pay for qualifying medical expenses at any time.
Use HSA money for medical reasons, though. If you're under 65 and use the funds for other purposes, that money becomes taxable income, and you could face an additional 20% tax on the nonmedical use of HSA money.
Once you turn 65, you can use HSA money for anything, but you'll owe tax on withdrawals that aren't used to pay medical expenses.
The major drawback of an FSA is that it is a use-or-lose plan. If you end up having a healthy year and have money left in your FSA at the end of the benefits period, your employer gets the excess money. Some things to note:
Rollovers: Some workplaces also allow employees to roll over a portion of the unused funds into next year’s account. The IRS limits FSA rollovers at $610 for 2023 and $640 in 2024.
Grace period: Some workplaces also allow a few months’ grace period to spend FSA funds from the previous year, but they are not required to do so. Grace periods typically go to mid-March.
You can find more in IRS Publication 969 [0]
. If you have additional questions, talk with your company's human resources or benefits department. About the authorsYou’re following Tina Orem
Visit your My NerdWallet Settings page to see all the writers you're following.
Tina Orem is an editor at NerdWallet. Before becoming an editor, she was NerdWallet's authority on taxes and small business. Her work has appeared in a variety of local and national outlets. See full bio.
You’re following Sabrina Parys
Visit your My NerdWallet Settings page to see all the writers you're following.
Sabrina Parys is a content management specialist on the taxes and investing team at NerdWallet, where she manages and writes content on personal income taxes. Her work has appeared in The Associated Press, The Washington Post and Yahoo Finance. See full bio.
On a similar note.
Download the app
Disclaimer: NerdWallet strives to keep its information accurate and up to date. This information may be different than what you see when you visit a financial institution, service provider or specific product’s site. All financial products, shopping products and services are presented without warranty. When evaluating offers, please review the financial institution’s Terms and Conditions. Pre-qualified offers are not binding. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion® directly.
NerdUp by NerdWallet credit card: NerdWallet is not a bank. Bank services provided by Evolve Bank & Trust, member FDIC. The NerdUp by NerdWallet Credit Card is issued by Evolve Bank & Trust pursuant to a license from MasterCard International Inc.
Impact on your credit may vary, as credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.
NerdWallet Compare, Inc. NMLS ID# 1617539
California: California Finance Lender loans arranged pursuant to Department of Financial Protection and Innovation Finance Lenders License #60DBO-74812
Insurance Services offered through NerdWallet Insurance Services, Inc. (CA resident license no.OK92033) Insurance Licenses
NerdWallet™ | 55 Hawthorne St. - 10th Floor, San Francisco, CA 94105
