Health savings account: a real benefit, with real eligibility rules
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Key takeaways
A health savings account lets you save pre-tax money for qualified medical expenses.
Enrollment in a specific type of high-deductible health plan is required to be eligible to contribute.
Contributions, growth, and qualified withdrawals are all tax-free, a combination often called a triple tax advantage.
Immigration status itself generally doesn’t affect HSA eligibility, but the specific health plan does.
Withdrawing funds for a non-qualified expense before age 65 triggers both income tax and a penalty.
A health savings account lets you save pre-tax money for medical expenses, but eligibility depends on having the right health insurance plan. Here’s how it works, and whether it applies to you.
What is a health savings account?
According to the IRS(opens in new window), a health savings account, or HSA, is a tax-advantaged account that lets eligible individuals save money to pay for qualified medical expenses. To contribute, enrollment in a high-deductible health plan is generally required, with no other disqualifying health coverage, among other specific requirements set out in IRS guidance.
An HSA is different from a workplace retirement account or a standard savings account in a specific, deliberate way: it’s designed exclusively around healthcare spending, but with more flexibility than many people expect. Unlike a flexible spending account, which typically requires using the funds within the plan year or risking losing them, an HSA balance carries over indefinitely, meaning unused funds simply continue to grow, tax-free, for as long as the account exists.
Health savings accounts: benefits, limitations, and who can use one
What can work well:
Contributions reduce taxable income. Money put into an HSA is generally deductible, lowering what’s owed in income tax for that year, which functions similarly to how a traditional retirement account contribution reduces taxable income.
Growth and qualified withdrawals are tax-free. This combination of tax advantages, sometimes called a triple tax advantage, makes an HSA one of the more efficient ways to save for healthcare costs, since very few other account types offer this same three-part tax benefit.
Funds roll over year to year. Unlike some other tax-advantaged health accounts, HSA balances don’t expire at the end of the year, making them useful for long-term savings too, including as a supplemental source of retirement savings if the funds aren’t needed for near-term medical costs.
What to watch for:
Eligibility requires a specific type of health plan. Enrollment in an eligible high-deductible health plan is required, and having other disqualifying coverage, such as a general-purpose flexible spending account or certain other health benefits, can create ineligibility to contribute even with an HSA-eligible plan otherwise.
Non-qualified withdrawals before age 65 carry a real penalty. According to the IRS, using HSA funds for a non-qualified expense before age 65 means paying income tax on the amount plus an additional tax penalty, making it important to keep good records of what counts as a qualified expense.
Contribution limits are set annually. The IRS adjusts maximum contribution amounts each year, and exceeding them can trigger tax consequences, so checking the current year’s limit rather than assuming it matches a previous year’s figure is worth doing.
Who qualifies
Immigration status itself generally doesn’t determine HSA eligibility, since eligibility is based on specific health insurance coverage rather than citizenship or visa status. Enrollment in a qualifying high-deductible health plan through an employer or purchased individually, without other disqualifying coverage, generally allows opening and contributing to an HSA regardless of immigration status, though confirming with a specific plan administrator is worth doing when questions arise about a particular situation, especially with health coverage in more than one country simultaneously.
This makes an HSA one of the more accessible financial tools available to newcomers, since it doesn’t require an established credit history, a Social Security number in every case, or U.S. citizenship; the main gatekeeping factor is simply whether the health plan qualifies.
Sending money for education internationally
For families managing both healthcare costs and education expenses, understanding health coverage options available to college students(opens in new window), including a school’s own student health plan or coverage through the Marketplace, helps clarify how an HSA fits alongside education savings for overall financial planning. Since HSA funds are specifically restricted to qualified medical expenses, they don’t substitute for education-specific savings vehicles like a 529 plan(opens in new window), but building both simultaneously, where a health plan allows, supports a more complete financial picture for a family managing costs across categories.
Some families find it useful to think of an HSA as one part of a broader financial safety net for a student studying away from home, alongside education savings and any family support sent internationally. A student facing an unexpected medical expense while away at school can draw on HSA funds specifically for that purpose, without needing to divert money that was set aside for tuition or require a family member to arrange an urgent transfer.
Common questions about health savings accounts
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Do I need to be a U.S. citizen to open an HSA?
No, eligibility is based on health insurance coverage, not citizenship or immigration status. A qualifying high-deductible health plan generally allows opening an HSA regardless of specific immigration status, though some banks or HSA administrators may have their own documentation requirements to open the account itself.
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What happens if I use HSA funds for something that isn’t a qualified medical expense?
Before age 65, income tax is owed on the amount plus an additional tax penalty, according to IRS rules. After age 65, funds can be withdrawn for any purpose without the penalty, though income tax is still owed on withdrawals not used for qualified medical expenses, similar to how a traditional retirement account is taxed upon withdrawal.
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Can I have an HSA and a regular health savings option like an FSA at the same time?
Sometimes, though it depends on the specific type of FSA. A general-purpose FSA typically creates ineligibility for also having an HSA, but a limited-purpose FSA, restricted to specific expenses like dental or vision care, can generally be used alongside an HSA, giving some families a way to maximize both types of tax-advantaged savings simultaneously.
In Summary
A health savings account offers a genuinely valuable, triple tax-advantaged way to save for medical expenses, but eligibility depends specifically on health insurance coverage, not immigration status, making it one of the more genuinely accessible financial tools for newcomers. Understanding both the real benefits and the specific rules around eligibility and withdrawals helps in using an HSA effectively as part of broader financial planning alongside education savings.
This publication is provided for general information purposes only and is not intended to cover all aspects of the topics discussed herein. This publication is not a substitute for seeking advice from an applicable specialist or professional. The content in this publication does not constitute legal, tax, or other professional advice from Remitly or any of its affiliates and should not be relied upon as such. While we strive to keep our posts up to date and accurate, we cannot represent, warrant, or otherwise guarantee that the content is accurate, complete, or up to date.