IRS Expands HSA Eligibility and Tax Benefits Under 2024 Legislation

The U.S. Department of the Treasury and IRS have released detailed guidance on recent changes to health savings accounts (HSAs) enacted under President Donald Trump's 2024 legislation. These updates expand eligibility for HSAs by allowing more types of high-deductible health plans (HDHPs) to qualify, particularly including many bronze and catastrophic plans available through the marketplace. As a result, starting in 2026, enrollees with these plans—even those purchased outside the ACA exchanges—can make HSA contributions for the first time. HSAs continue to offer significant tax advantages, including upfront deductions for contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. The new regulations also permanently extend the "safe harbor" provision allowing certain telehealth and remote health services to be used before meeting deductibles without affecting HSA eligibility. This provision first became available during the pandemic and is retroactive to January 1, 2025. Additionally, starting in 2026, individuals using direct primary care arrangements (DPC), which are healthcare services paid outside of insurance claims, will retain HSA eligibility under specified conditions. Moreover, HSAs can be used to pay for DPC fees, expanding consumer flexibility in healthcare spending. These developments coincide with ongoing legislative debates over the future of enhanced Affordable Care Act (ACA) marketplace subsidies, which currently help millions afford coverage through premium tax credits. The subsidies, credited with supporting over 22 million enrollees in 2025, are set to expire unless renewed by Congress. Republican senators have proposed an alternative approach that would discontinue ACA subsidies but allocate funds directly to eligible HSA accounts for individuals enrolled in bronze or catastrophic plans, offering fixed payments based on age. The policy shifts reflect broader trends toward consumer-directed healthcare financing and efforts to increase flexibility in how Americans save for and manage healthcare costs. Though the upcoming subsidy changes remain uncertain, expanding HSA eligibility aligns with regulatory goals to offer more tax-advantaged options amid evolving insurance market dynamics.