Health savings accounts (HSAs) in Tennessee

The short answer: an HSA is a savings account for medical costs that you can use if you have an HSA-compatible health plan. Money goes in tax-deductible, grows tax-free, and comes out tax-free for medical care. For 2027 you can put in up to $4,500 for yourself or $9,000 for a family. Since 2026, every bronze and catastrophic marketplace plan qualifies, so many Tennesseans buying on HealthCare.gov can now open one. Unused money rolls over every year and stays yours.

How an HSA works

1. Have an HSA-compatible plan. That's any bronze or catastrophic plan available through the marketplace, or any other plan that meets the high-deductible health plan (HDHP) rules. Many employer plans qualify too.
2. Open the account yourself at a bank, credit union, or HSA provider. HealthCare.gov and your insurer don't open it for you (employers sometimes do).
3. Put money in, up to the yearly limit. You can contribute for a year until the tax filing deadline the next spring.
4. Spend it on qualified medical costs — deductibles, copays, prescriptions, dental, vision, and more — with a debit card or by paying yourself back. Keep your receipts.
5. Keep what you don't spend. There's no "use it or lose it." The money is yours even if you change plans, jobs, or states, and many HSAs let you invest it.

The tax breaks

• Going in: contributions are deducted from your income on your federal return, even if you don't itemize. Contributions through an employer's payroll also skip Social Security and Medicare taxes.
• While it grows: interest and investment gains aren't taxed.
• Coming out: withdrawals for qualified medical expenses are tax-free, at any age.

A Tennessee note: Tennessee doesn't tax wages or salary, so the tax savings here are federal only. That's still worth a lot: someone in the 12% federal bracket who contributes $4,500 saves about $540 in federal income tax.

2026 and 2027 limits

The contribution limit includes anything your employer puts in. If you're only HSA-eligible for part of the year, your limit is generally prorated by month.

Which marketplace plans work with an HSA

Every bronze and catastrophic plan available through the marketplace. Starting January 1, 2026, the 2025 budget law (Public Law 119-21) treats these plans as HSA-compatible even if they don't meet the usual HDHP rules. IRS guidance (Notice 2026-05) says this applies whether you buy the plan on HealthCare.gov or directly from the insurer.

Silver, gold, and platinum plans, only if the plan specifically meets the HDHP rules. A few do; HealthCare.gov marks HSA-eligible plans in its plan details. Check before you assume.

Two other changes that make HSAs easier:

• Telehealth before the deductible is now permanently allowed. Your plan can cover virtual visits for free or a small copay without costing you HSA eligibility.
• Direct primary care. If you pay a monthly membership to a direct primary care practice (up to $150 a month for one person or $300 for a family, adjusted for inflation after 2026), you can still contribute to an HSA and use HSA money to pay the fee.

Who can't contribute

You generally can't put money into an HSA for any month you:

• Are enrolled in Medicare, including Part A. Medicare Part A can start up to six months retroactively when you sign up after 65, so stop contributing six months before you apply.
• Have other health coverage that isn't HSA-compatible, such as a spouse's regular plan that covers you, or a general-purpose health FSA (yours or your spouse's).
• Have TRICARE, or received VA care in the past three months for something other than a service-connected disability, preventive care, or certain other exceptions.
• Can be claimed as a dependent on someone else's tax return.

You can still spend money already in your HSA after you lose eligibility, including on Medicare premiums after 65.

What you can spend it on

Qualified medical expenses, including:

• Deductibles, copays, and coinsurance
• Prescriptions and insulin
• Dental care and orthodontia (see what common dental work costs in Tennessee from Tennessee Dental Authority, an independent guide)
• Eye exams, glasses, and contacts
• Mental health care
• Many over-the-counter medicines and menstrual products
• Medicare premiums (Parts B and D and Medicare Advantage) after 65, but not Medigap

Generally not: regular health insurance premiums. Exceptions are COBRA premiums, premiums while you're receiving unemployment benefits, long-term care insurance (within limits), and Medicare premiums after 65.

Non-medical withdrawals before 65 are taxed as income plus a 20% penalty. After 65, the penalty goes away; non-medical withdrawals are just taxed as income, like a traditional IRA.

How an HSA can increase your marketplace tax credit

Your premium tax credit is based on your modified adjusted gross income (MAGI). HSA contributions lower that number. For people near an eligibility line, that can be worth far more than the tax deduction itself.

Example: a married couple, both 55 or older, with no children earns $88,000 in 2027. That's about 407% of the poverty level for a household of two ($21,640), so under 2027 rules they get no tax credit at all. If they pick a bronze plan and contribute $9,000 to an HSA, plus a $1,000 catch-up contribution each, their MAGI drops to $77,000, about 356% of the poverty level. Now they qualify for a credit that, depending on their county and ages, could be worth hundreds of dollars a month.

Two cautions:

• Each spouse who is 55 or older makes their own catch-up contribution into their own HSA.
• Report the expected HSA contribution in your income estimate on HealthCare.gov, and actually make the contribution. If you don't, you'll owe the extra credit back at tax time, with no repayment cap. How to estimate income · Try the estimator.

HSA vs. FSA vs. HRA

ICHRA: some employers give workers tax-free money to buy their own individual plan, through an individual coverage HRA. If your ICHRA pays for a bronze plan, you may be able to pair it with an HSA. If you're offered an affordable ICHRA, you generally can't also get a marketplace tax credit. Employer coverage vs. the marketplace.

Is an HSA right for you?

An HSA is a good fit if you:

• Choose a bronze or catastrophic plan, or have an HSA-compatible employer plan
• Can set money aside, even a little each month
• Want a cushion for your deductible, or a tax-advantaged way to save for health costs in retirement
• Are near the 400% cliff and want to lower your MAGI

It's less useful if you can't afford to save beyond your premium, or if you qualify for cost-sharing reductions: at 100%–250% of the poverty level, a silver plan's lower deductible usually beats a bronze plan plus an HSA.

Frequently asked questions

Can I have an HSA with a marketplace plan in Tennessee? Yes, with any bronze or catastrophic marketplace plan (since 2026), or a silver or gold plan that meets the HDHP rules. You open the HSA yourself at a bank or HSA provider.

How much can I put in an HSA in 2027? Up to $4,500 for self-only coverage or $9,000 for family coverage, plus $1,000 if you're 55 or older. Employer contributions count toward the limit.

When is the deadline to contribute? You can make contributions for a tax year until that year's federal filing deadline, usually April 15 of the next year.

Does an HSA lower my income for marketplace subsidies? Yes. HSA contributions reduce your modified adjusted gross income, which is what HealthCare.gov uses for your tax credit. Include your planned contribution in your income estimate.

Does Tennessee tax HSA contributions? Tennessee has no income tax on wages, so there's no state tax on HSA contributions or withdrawals. The tax benefits are federal.

What happens to my HSA when I go on Medicare? You can't contribute once you're enrolled in Medicare, but you keep the account and can spend it tax-free on medical costs, including Medicare Part B, Part D, and Medicare Advantage premiums. Stop contributing six months before you enroll if you sign up after 65.

Can I use my HSA to pay my marketplace premiums? Generally no. Regular insurance premiums aren't qualified expenses, except for COBRA, premiums while receiving unemployment benefits, long-term care insurance, and Medicare premiums after 65.

Can I use my HSA for my spouse's or kids' medical bills? Yes, for your spouse and tax dependents, even if they aren't on your health plan.

What's the difference between an HSA and an FSA? An HSA belongs to you, rolls over every year, and requires an HSA-compatible plan. A health FSA is an employer benefit that mostly must be used within the plan year and stays with the employer if you leave.

Is a direct primary care membership compatible with an HSA? Yes, starting in 2026, for arrangements up to $150 a month for one person or $300 for a family (adjusted for inflation after 2026). You can also pay the membership fee with HSA money.

Keep reading

• How to read a plan's cost table
• Marketplace plan tiers, compared
• Subsidies and the 400% cliff
• Health insurance when you're self-employed
• Retiring before 65

Sources

• IRS Revenue Procedure 2026-24 (May 2026) — 2027 HSA contribution limits and HDHP thresholds; Rev. Proc. 2025-19 for 2026
• Public Law 119-21 (2025) and IRS Notice 2026-05 / news release IR-2025-119 (December 9, 2025) — bronze and catastrophic plans treated as HSA-compatible; direct primary care ($150/$300 monthly limits); permanent telehealth relief
• IRS Publication 969 — HSA eligibility, Medicare and other disqualifying coverage, qualified expenses, insurance premiums exceptions, 20% additional tax, contribution deadline, prorating
• IRS Publication 502 — qualified medical expenses
• Tennessee Department of Revenue — no state income tax on wages (Hall income tax fully repealed for tax years beginning January 1, 2021)
• IRS Revenue Procedure 2026-26 and HHS 2026 poverty guidelines — tax credit example