---
title: Health savings accounts (HSAs) in Tennessee
url: https://www.tnhealthcoverageexplained.org/costs/hsa
description: How HSAs work with Tennessee marketplace plans: 2027 limits, which plans qualify (every bronze plan now does), how to open one, and how an HSA can lower your tax credit income.
last_verified: 2026-10-18
publisher: TN Health Coverage Explained (independent; does not sell insurance)
---

# 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

| | 2026 | 2027 |
|---|---|---|
| HSA contribution limit, self-only | $4,400 | $4,500 |
| HSA contribution limit, family | $8,750 | $9,000 |
| Catch-up contribution, age 55+ | $1,000 | $1,000 |
| HDHP minimum deductible | $1,700 self / $3,400 family | $1,750 self / $3,500 family |
| HDHP maximum out-of-pocket | $8,500 self / $17,000 family | $8,700 self / $17,400 family |

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](https://tennesseedentalauthority.com/how-much-does-dental-work-cost-in-tennessee), 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](https://www.tnhealthcoverageexplained.org/costs/estimate-your-subsidy) · [Try the estimator](https://www.tnhealthcoverageexplained.org/tools/subsidy-estimator).

## HSA vs. FSA vs. HRA

| | HSA | Health FSA | HRA (including ICHRA) |
|---|---|---|---|
| Who owns it | You | Your employer's plan | Your employer's plan |
| Who funds it | You and/or your employer | Mostly you, through payroll | Only your employer |
| Needs a specific health plan | Yes, HSA-compatible | No | Depends on the type |
| Unused money | Rolls over forever | Mostly lost at year end (small carryover allowed) | Up to the employer |
| Keep it if you leave your job | Yes | No | Usually no |
| Available if self-employed | Yes | No | No |

**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](https://www.tnhealthcoverageexplained.org/employer-coverage).

## 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](https://www.tnhealthcoverageexplained.org/using-your-plan/reading-your-plan)
- [Marketplace plan tiers, compared](https://www.tnhealthcoverageexplained.org/marketplace/plans-compared)
- [Subsidies and the 400% cliff](https://www.tnhealthcoverageexplained.org/costs/subsidies)
- [Health insurance when you're self-employed](https://www.tnhealthcoverageexplained.org/guides/self-employed)
- [Retiring before 65](https://www.tnhealthcoverageexplained.org/guides/early-retiree)

## 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