Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Health Savings Accounts (HSA)

Types of Tax-Favored Arrangements

What is an HSA?

An HSA is the newest of all tax-favored medical savings plans. An HSA is a tax-exempt trust or custodial account that a taxpayer sets up with a qualified HSA trustee. Distributions from an HSA are nontaxable if the funds are used for qualified medical expenses. A taxpayer must be an eligible individual to qualify for an HSA.

No permission or authorization from the IRS is necessary to establish an HSA. To set up an HSA a taxpayer will need to work with a trustee. A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRA) or Archer MSA. The HSA can be established through a trustee that is different from the taxpayer's health plan provider.

An HSA is created by:

  • Enrolling in a High-Deductible Health Plan (HDHP) and then
  • Opening a tax-exempt trust or custodial account, with a qualified HSA trustee, to pay for qualified medical expenses