Photo by Towfiqu barbhuiya
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Medical costs, including insurance premiums, keep increasing. A high-deductible policy and companion health savings account could be the perfect healthcare and tax Rx for some, especially with the 2027 inflation adjustments.
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The elimination of the enhanced federal subsidies for Affordable Care Act (ACA, or still Obamacare to many) insurance policies has forced millions of Americans to make difficult health care choices.
Some are taking their chances without medical insurance. Others are looking at less, but acceptable, coverage they can afford without the bonus tax support.
Those in the second group might find their best option is a high-deductible health plan, or HDHP. These policies typically have lower monthly premiums than traditional plans, and can help cover emergency expenses.
But there is a trade-off for those lower premiums. Payments for other, less-severe medical treatments fall into the plan’s high-deductible amount.
To cover those larger out-of-pocket deductible expenses, HDHP owners usually opt for an associated health savings account, or HSA. Not only does an HSA help pay medical expenses, it also offers other tax savings.
Those tax benefits mean that HDHPs and HSAs must meet Internal Revenue Service guidelines. The deductible amount that qualifies for HDHP treatment, as well as how much you can put into an HSA, are adjusted annually for inflation.
The IRS on Friday, May 29, afternoon issued Revenue Procedure 24-25 with those amounts for the 2027 tax year.
2027 high-deductible limits: In 2027, a medical insurance policy qualifies as a high-deductible plan if it has a minimum annual deductible of $1,750 for individual coverage. That’s up a tad from $1,700 for 2026.
For family coverage, an HDHP next year has a deductible of $3,500 for family coverage, again up a bit from this year’s $3,400 family deductible.
There also are annual inflation-adjusted limits on the maximum amount of out-of-pocket expenses associated with an HDHP. This includes deductibles, co-payments, and other amounts, but not the premiums you pay for the plan itself.
For 2027, these expenses cannot exceed $8,700 for self-only coverage, an increase from 2026’s $8,500 limit. The limit for family plans is $17,400. Again, that’s a bump from this year’s limit of $17,000 for family coverage.
For those who like tables (and who doesn’t?!), the one below provides an easy-to-see comparison of the HDHP amounts for current 2026 and upcoming 2027 tax years.
| High-Deductible Health Plan types | 2026 Limits | 2027 Limits |
| Maximum health plan deductible, single coverage | $1,700 | $1,750 |
| Maximum health plan deductible, family coverage | $3,400 | $3,500 |
| Maximum out-of-pocket expenditures, single coverage | $8,500 | $8,700 |
| Maximum out-of-pocket expenditures, family coverage | $17,000 | $17,400 |
Essentially, a plan’s deductible amount must be at least the amounts shown in the table.
HSA adjustments, too: Similar inflation changes are also ahead for the HSA that helps cover expenses that fall into the associated policy’s high deductible.
For 2027, you can contribute up to $4,500 to an HSA if you have individual HDHP coverage. That’s up from the 2026 tax year’s $4,400 maximum HSA contribution.
Family HDHP coverage in 2027 will let you put up to $9,000 into the associated HSA. That is an increase from the current $8,750 family coverage HSA maximum.
Policy holders who are 55 or older by Dec. 31 can sock away an additional $1,000 for the tax year. Note that like other tax code catch-up provisions, the HSA additional contribution for older account owners is a flat one grand. It is not adjusted annually for inflation.
If you’re married, have family HDHP coverage, and your spouse also will be 55 by the end of the year, he or she also can take advantage of the added $1,000 catch-up amount for his or her own separate HSA.
New, added HSA eligibility: The One Big Beautiful Bill Act (OBBBA), the Republicans comprehensive tax and spending bill enacted July 4, 2025, also expanded HSA eligibility. Details are in IRS Notice 2026-05, but highlights are below.
- Telehealth and Remote Care Services — The OBBBA made permanent the ability of patients to receive telehealth and other remote care services before meeting their HDHP deductible while remaining eligible to contribute to an HAS. This change was retroactive to plan years that started on or after Jan. 1, 2025.
- Bronze and Catastrophic Plans Treated as HDHPs — As of Jan. 1, 2026, bronze and catastrophic plans available through a healthcare exchange (which is where most people get what are still referred to as Obamacare policies) are considered HSA-compatible, regardless of whether the plans satisfy the general definition of an HDHP. This expands the ability of people enrolled in these plans to contribute to HSAs, which they generally have not been able to do in the past. However, bronze and catastrophic plans do not have to be purchased through an exchange to qualify for the new relief.
- Direct Primary Care Service Arrangements — Also at the start of 2026, an otherwise eligible individual enrolled in certain direct primary care (DPC) service arrangements may contribute to an HSA. In addition, these individuals may use their HSA funds tax-free to pay periodic DPC fees.
HRAs also get inflation bump: The IRS announcement also notes an increase in 2026 for an excepted benefit HRA, the acronym for a health reimbursement arrangement.
The maximum HRA amount for 2026 is $2,250. That’s a slight increase from the 2026 HRA amount of $2,200.
HRAs are employer-funded medical plans whose funds are used to pay back, or reimburse, employees for qualified medical expenses. This includes vision, dental, prescription, and other types of benefits separate from their main company-provided health insurance plan.
The money that goes into an HRA is pre-tax, meaning the workers don’t face any tax consequences on approved reimbursements. The business also is allowed to claim a tax deduction for these reimbursements.
However, unlike an HSA, an HRA is not portable. Workers cannot take HRA funds with them when they leave the job that offers the medical savings option.
Triple tax benefits for an HSA: Most of us tend to think short term when it comes to financial decisions. That’s understandable, especially at times like these where money is tight for many of us.
That’s why some HDHP enrollees ignore the benefit of opening an HSA.
Sure, that will give you more immediately available cash. But if you have a high deductible and a medical emergency pops up, which, let’s be honest, seems to always happen at the worst possible time, you’ll be stuck covering all the deductible costs.
But if you have an HSA, not only will it help pay those unexpected deductibles, it also has three nice tax advantages.
First, the money you put into your HSA is tax free. Your contributions usually are made through salary deferral at your workplace, meaning your HSA amount is taken out of your paycheck before taxes are calculated. Plus, any employer contributions aren’t included in your taxable income.
If you make HSA contributions directly, you deduct the amount you contribute when you file your taxes. This is what’s known as an above-the-line deduction, meaning you don’t have to itemize to make the medical claim. It’s claimed on line 13 of Form 1040 Schedule 1.
Second, the earnings on the money you contribute to your HSA grows tax-free. That’s tax-free, not tax-deferred. Those earnings aren’t taxable income.
Third, when you use the HSA money to pay allowable out-of-pocket medical expenses, those withdrawals also are tax-free. This includes using HSA money for not just the usual, and many, IRS-approved medical costs we all tend to run up each year, but also to pay for treatments of chronic medical conditions.
OK, we are talking taxes, so there’s a caveat.
Be careful when taking HSA distributions. Make sure to use the funds for allowable medical costs. If you’re younger than 65 and spend HSA money on something that’s not IRS approved, you’ll owe a 20 percent penalty on that withdrawal.
Added HSA advantages: OK, those are the big three immediate tax savings from an HSA, but wait, there’s more.
An HSA’s year-end balance can be carried over from year to year. There’s no use-it-or-lose-it threat as with a workplace flexible spending account, or FSA.
Your HSA is portable. It’s not tied to your job, so if you change employers, you can take your HSA with you when you go to your new workplace.
Finally, if you have money in your HSA after you turn 65, you can use the funds without tax penalty for any reason. This 65+ withdrawal option means many folks essentially treat a well-funded HSA as another, de facto retirement account. Note, though, that you will owe ordinary income taxes on HSA withdrawals not used for qualified medical expenses.
Of course, any medical coverage decision is based on many things, not just the tax implications.
But if tax savings are a component, do take them into account, along with all your (and covered family) health care and financial factors, so that you can find a policy that fits both your medical and fiscal needs.
That thorough evaluation might just show that an HDHP and HSA is the best health care coverage prescription.
More inflation updates coming this fall: One more thing for total tax nerds (and if you’ve read this far, you qualify for honor!), this post technically is the first of the ol’ blog’s 2027 tax inflation series.
But it doesn’t get that official designation. That goes to the IRS’ fall announcement of tons of tax provisions that are subject to inflation and cost-of-living bumps. I break those out in Don’t Mess With Taxes’ 10-part series, starting with tax bracket changes.
If you want an inflation appetizer, you can check out the 2026 series (links for all the posts are at the end of Part 1). You also can find other posts that deal with tax code changes affected by higher prices in the ol’ blog’s Taxes Brackets/Inflation category.
And as for more tax-related medical matters, you also might find these items of interest:
- IVF costs are tax deductible medical expenses
- Tracking, and maximizing, tax-deductible medical miles
- These tax-deductible medical expenses could make itemizing worthwhile
By the medical tax numbers: Finally, I had some personal business to take care of Friday (and took Saturday off), so today’s belated posting of the HDHP and HSA 2027 changes earn this weekend’s By the Numbers recognition.
Since I usually pick one or two figures to highlight, I’m going with the 2027 HSA contribution maximums.
Those are up to $4,500 to an HSA if you have individual HDHP coverage, and a max of $9,000 for those with a family policy.
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