Health savings accounts explained: 2026 and 2027 limits

A health savings account (HSA) is a tax-advantaged account you can open when you are covered by an HSA-compatible health plan. Contributions are deductible, earnings in the account are not taxed, and withdrawals for qualified medical expenses come out untaxed. For 2026 you can contribute up to $4,400 with self-only coverage or $8,750 with family coverage (IRS Rev. Proc. 2025-19, irs.gov/pub/irs-drop/rp-25-19.pdf); for 2027 the limits rise to $4,500 and $9,000 (IRS Rev. Proc. 2026-24, irs.gov/pub/irs-drop/rp-26-24.pdf). People 55 or older can add $1,000. New in 2026: Bronze and Catastrophic marketplace plans count as HSA compatible (IRS Notice 2026-5, irs.gov/pub/irs-drop/n-26-05.pdf), which opens HSAs to many Coloradans who buy their own coverage on Connect for Health Colorado. This guide covers the rules that trip people up: partial years, the last-month rule, married couples, investing and the stop date before Medicare.

The 2026 and 2027 numbers

Who can contribute

IRS Publication 969 sets four tests, checked month by month (IRS Publication 969, irs.gov/publications/p969):

• You are covered by an HSA-compatible plan on the first day of the month.
• You have no other health coverage except the kinds the IRS permits. Permitted coverage includes dental, vision, accident and specific disease coverage, and a policy that pays a fixed amount per day of hospitalization, so a hospital indemnity policy does not by itself end eligibility. A general-purpose health FSA or a spouse plan that covers you does.
• You are not enrolled in any part of Medicare.
• No one can claim you as a dependent on their tax return.

What changed for 2026

• Bronze and Catastrophic plans are HSA compatible. Notice 2026-5 says this applies to plans available through a marketplace, and it addresses when an off-exchange Bronze or Catastrophic plan sold on the individual market can qualify too.
• Direct primary care memberships are allowed. You can contribute while enrolled in a qualifying direct primary care arrangement with fees up to $150 a month ($300 for more than one person), and you can pay those fees from the HSA. Rev. Proc. 2026-24 keeps the same limits for 2027.
• Telehealth before the deductible is permanently allowed without losing HSA eligibility.

Joining partway through the year: proration

If you are eligible for only part of the year, the limit is figured month by month: one twelfth of the annual limit for each month you were eligible on the first day of the month. Publication 969 shows the method with a Medicare example: someone with self-only coverage who is eligible for six months and is 55 or older can contribute the annual amount including the catch-up, multiplied by 6 and divided by 12.

The catch-up is prorated the same way. A 57-year-old who becomes eligible on April 1, 2026 with self-only coverage has nine eligible months, so the limit is ($4,400 + $1,000) x 9 / 12 = $4,050.

You have until the tax filing deadline to make contributions for a year. Publication 969 states that 2025 contributions could be made through April 15, 2026; the same pattern applies to 2026 contributions in 2027.

The last-month rule and its testing period

There is an exception that lets a late-year starter contribute the full year. Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most people), you are treated as eligible for the whole year and can contribute the full annual amount.

The catch is the testing period. If you use the last-month rule, you must stay eligible from December 1 through December 31 of the following year. If you fail, for reasons other than death or disability, the extra amount you could only contribute because of the rule is added to your income for the year you failed, plus a 10% additional tax (IRS Publication 969). The worked example below puts dollars on both choices.

Married couples: the family coverage split

• If either spouse has family HSA-compatible coverage, both spouses are treated as having family coverage.
• The family limit ($8,750 for 2026) is shared. It is split equally between the spouses unless they agree on a different division, and each spouse contributes to their own HSA; there are no joint HSAs.
• The $1,000 catch-up is personal. Each spouse who is 55 or older and not on Medicare can add $1,000, but it must go into the account of that spouse. If both qualify, the household total for 2026 can reach $10,750.
• These married rules apply only when both spouses are eligible individuals. If one spouse is on Medicare or covered by a non-compatible plan, the eligible spouse figures a limit on their own.

A worked example: a Brighton couple who start mid-year

Hypothetical Colorado household, not a real client. A married couple in Brighton, ages 57 and 52, enroll in a family Bronze plan through Connect for Health Colorado that starts April 1, 2026, after one of them leaves a job. Their 2026 household income before any HSA deduction is $70,000. Only the 57-year-old qualifies for the catch-up.

Option one, prorate. They are eligible for nine months (April through December). The shared family limit is $8,750 x 9 / 12 = $6,562.50, split $3,281.25 each by default. The 57-year-old adds a prorated catch-up of $1,000 x 9 / 12 = $750 to their own account. Total: $7,312.50.

How the deduction can raise a premium tax credit. For 2026 coverage the poverty guideline for two people is $21,150 (HHS 2025 poverty guidelines, govinfo.gov/content/pkg/FR-2025-01-17/pdf/2025-01377.pdf). At $70,000 they are at about 331% of the poverty level, where the 2026 applicable percentage is 9.96% (IRS Rev. Proc. 2025-25, irs.gov/pub/irs-drop/rp-25-25.pdf): an expected contribution of $6,972 toward the benchmark Silver plan. The $7,312.50 HSA deduction lowers their modified adjusted gross income to $62,687.50, about 296% of the poverty level, where the applicable percentage is about 9.85%. The expected contribution falls to about $6,175, so if the benchmark premium is higher than that, their premium tax credit rises by about $797 for the year, on top of the income tax saved by the deduction itself.

Option two, the last-month rule. Because they are covered on December 1, 2026, they could instead contribute the full $8,750 plus the full $1,000 catch-up, $9,750 in total. They must then stay eligible through December 31, 2027. Suppose the 52-year-old takes a job in June 2027 and the couple moves to that employer plan, which is not HSA compatible. The amount they could only contribute because of the rule ($8,750 minus $6,562.50, plus $1,000 minus $750, which is $2,437.50) is added to their 2027 income, and a 10% additional tax of $243.75 applies on top of regular income tax.

Colorado state tax treatment

Colorado starts its income tax from your federal taxable income, which, in the words of the Colorado Department of Revenue, has already considered your deductions (Colorado DR 0104 instructions, tax year 2025, tax.colorado.gov/sites/default/files/documents/Book104_2025.pdf). The federal HSA deduction is therefore carried into your Colorado return, and the same booklet lists the health savings account deduction among the federal adjustments that part-year residents and nonresidents apportion. The 2025 booklet lists the Colorado income tax rate as 4.4%.

In the worked example above, that means the $7,312.50 deduction lowers Colorado taxable income as well as federal. At the 4.4% rate listed for tax year 2025, that is about $322 of Colorado tax. Check the current year booklet for the rate that applies to the year you contribute.

Three tax advantages in one account

Contributions are deductible (or pre-tax through payroll), earnings are not taxed while they stay in the account, and withdrawals for qualified medical expenses are not taxed. Unlike a flexible spending account, the balance is yours and carries over every year, even if you change jobs or plans: Publication 969 calls the HSA portable.

Investing the balance

Many HSA trustees let you keep part of the balance in cash for near-term bills and move the rest into investment options the trustee offers. Publication 969 says interest and other earnings on the assets in the account are not taxed while held in the HSA. Investments can lose value, fees vary by trustee, and money you may need for this year deductible is usually kept in cash.

Some people pay current medical bills from other savings and leave the HSA invested, keeping receipts to reimburse themselves later. Publication 969 requires records showing that each withdrawal paid a qualified medical expense that was not reimbursed elsewhere or deducted, and expenses incurred before you opened the HSA do not qualify. Lisa does not give investment advice; the choice of investments is between you, your trustee and any financial professional you work with.

What you can spend it on

• Deductibles, copays and coinsurance.
• Prescriptions, dental work, eye exams, glasses and hearing aids.
• Medicare Part B, Part D and Medicare Advantage premiums once you are 65 or older (but not Medigap premiums).
• COBRA premiums and health coverage while you receive unemployment compensation.
• Non-medical withdrawals before 65 are taxed and carry a 20% additional tax; after 65 they are taxed as income with no additional tax.

HSAs and Medicare: the six-month trap

Once you enroll in Medicare your contribution limit is zero, although you can keep spending the balance. The trap: if you sign up for Part A after 65, Part A coverage starts up to six months back from when you sign up, but never earlier than the month you turned 65 (Medicare.gov, medicare.gov/basics/get-started-with-medicare/sign-up/when-does-medicare-coverage-start). Publication 969 says contributions made during retroactive Medicare coverage are excess contributions, which carry a 6% excise tax for each year they stay in the account unless withdrawn in time.

If you are working past 65 and contributing, plan the stop date: stop contributions about six months before you apply for Medicare, and prorate the final year. Our working past 65 guide walks through the timing.

Is an HSA plan right for you?

An HSA plan usually suits people who can afford the deductible if something happens and who will actually fund the account. It is a weaker fit if you expect heavy, steady medical costs and cannot cover the deductible from savings, or if a Silver plan with cost-sharing reductions would cost you less overall. If your income qualifies for cost-sharing reductions on a Silver plan, compare that plan with a Bronze plan plus an HSA before you choose.

What Lisa checks for you

• Whether the plan you are considering is HSA compatible under the 2026 rules, including Bronze and Catastrophic plans on Connect for Health Colorado.
• Your first eligible month and the prorated limit, and whether the last-month rule makes sense given your job plans for the next year.
• For couples: whose coverage is family coverage, how the shared limit is split, and which spouse gets a catch-up.
• How an HSA deduction changes your estimated premium tax credit, using your actual county benchmark price.
• Your Medicare start date and the month to stop contributions if you are working past 65.
• Whether a supplemental policy you hold, such as hospital indemnity, is the kind the IRS permits alongside an HSA.

Questions to ask

• Is this plan HSA compatible for the whole year I will be on it?
• Does my spouse have coverage that covers me, such as a general-purpose FSA, that would block contributions?
• If I start late in the year, should I prorate or use the last-month rule, and can I stay eligible through the testing period?
• Which trustee will hold the account, what are its fees, and which investment options does it offer?
• When will my Medicare coverage start, and when should my last contribution be made?

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The bottom line

With Bronze plans now HSA compatible, more Coloradans can use one of the most tax-efficient ways to pay for health costs. Know your first eligible month, choose between proration and the last-month rule with the testing period in mind, split the family limit deliberately, keep receipts, and plan the stop date before Medicare. To compare an HSA-compatible plan with a Silver or Gold plan for your household, send Lisa a message or call (303) 887-8584.