IRS Form 5305-B – Health Savings Accounts (HSAs) offer a powerful way to save for medical expenses while enjoying significant tax advantages. If you’re looking to set up an HSA as a trust account, IRS Form 5305-B is the key document you’ll need. This model trust agreement, approved by the IRS, helps individuals establish an HSA exclusively for paying or reimbursing qualified medical expenses. In this article, we’ll break down what Form 5305-B is, its purpose, eligibility requirements, how to use it, and the latest rules for 2026, including contribution limits and recent legislative updates.
Whether you’re an individual planning for healthcare costs or an employer exploring benefits options, understanding Form 5305-B can help you maximize tax savings and build a financial safety net for medical needs.
What Is IRS Form 5305-B?
IRS Form 5305-B is a model trust account agreement designed specifically for creating a Health Savings Trust Account under Section 223(a) of the Internal Revenue Code. It’s not a form you file with the IRS—instead, it’s a template agreement executed between the account owner (you) and a qualified trustee, such as a bank or insurance company. The form ensures your HSA complies with federal regulations, allowing tax-free contributions, growth, and withdrawals for eligible expenses.
Unlike custodial HSAs (which use Form 5305-C), Form 5305-B establishes a trust structure, providing a formal legal framework for managing the account. This can be beneficial for those seeking additional protections or specific investment options, though both types function similarly for tax purposes.
Key features of the form include:
- Articles I-XI: These outline rules for contributions, distributions, investments, and more.
- General Instructions: Explain the form’s purpose and definitions, such as what qualifies as a High Deductible Health Plan (HDHP).
- Specific Instructions: Cover additional provisions that can be added, like investment restrictions or fee structures.
The form was last revised in October 2016, but its core structure remains relevant, with annual adjustments for inflation on limits.
Purpose of Form 5305-B and HSA Benefits
The primary purpose of Form 5305-B is to create an HSA for the exclusive benefit of the account owner, their spouse, and dependents. HSAs are tax-advantaged accounts that help cover qualified medical expenses, such as doctor visits, prescriptions, and hospital stays. Contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified expenses are also tax-free—often called a “triple tax advantage.”
Benefits of using an HSA include:
- Tax Savings: Reduce your taxable income with contributions and avoid taxes on growth and qualified withdrawals.
- Flexibility: Funds roll over year to year, unlike Flexible Spending Accounts (FSAs).
- Investment Potential: Many HSAs allow investing in stocks, bonds, or mutual funds for long-term growth.
- Portability: The account stays with you even if you change jobs or health plans.
Recent legislation, like the One Big Beautiful Bill Act (OBBBA), has expanded HSA access, making bronze and catastrophic plans HSA-compatible starting in 2026, regardless of whether they meet standard HDHP deductibles. This opens HSAs to more people with lower-premium plans.
Eligibility Requirements for an HSA Using Form 5305-B
To establish an HSA via Form 5305-B, you must meet specific IRS criteria:
- Be covered by a High Deductible Health Plan (HDHP).
- Not be enrolled in Medicare.
- Not be claimed as a dependent on someone else’s tax return.
- Not have other non-HDHP health coverage (with exceptions for preventive care, dental, vision, or certain permitted insurance).
For 2026, an HDHP is defined as a plan with:
- Minimum annual deductible of $1,700 for self-only coverage or $3,400 for family coverage.
- Maximum out-of-pocket expenses (excluding premiums) of $8,500 for self-only or $17,000 for family.
Under OBBBA, telehealth and remote care services can be covered pre-deductible without disqualifying your HDHP, and this is now permanent. Additionally, enrollment in qualifying Direct Primary Care (DPC) arrangements won’t affect eligibility, and DPC fees can be paid tax-free from your HSA starting in 2026.
How to Complete and Use IRS Form 5305-B?
Completing Form 5305-B is straightforward:
- Provide Personal Details: Enter your name, date of birth, address, and the trustee’s information.
- Acknowledge Eligibility: Confirm you meet HDHP and other requirements.
- Initial Contribution: Specify an initial cash amount (optional but common).
- Sign the Agreement: Both you and the trustee sign; witnesses may be required in some cases.
- Add Custom Provisions (Article XI): Include extras like investment options or distribution rules, ensuring they comply with IRS guidelines.
Do not file the form with the IRS—keep it with your records. You can complete it anytime during the tax year, but contributions for a given year must be made by your tax filing deadline (e.g., April 15, 2027, for 2026).
The trustee must be IRS-approved, such as a bank or insurance company. Once set up, you can make contributions directly or through payroll deductions if offered by your employer.
2026 HSA Contribution Limits and Rules
Contributions to your HSA are limited annually and adjusted for inflation. For 2026:
- Self-only coverage: Up to $4,400.
- Family coverage: Up to $8,750.
- Catch-up contribution (age 55+ and not on Medicare): Additional $1,000.
| Coverage Type | 2026 Contribution Limit | Catch-Up (55+) |
|---|---|---|
| Self-Only | $4,400 | +$1,000 |
| Family | $8,750 | +$1,000 |
Contributions can come from you, your employer, or others. Rollovers from other HSAs, Archer MSAs, or IRAs (via trustee-to-trustee transfer) don’t count toward limits. Excess contributions incur a 6% excise tax, so monitor your totals.
Distributions, Taxes, and Investments
Distributions for qualified medical expenses (e.g., as defined in IRC Section 213(d)) are tax-free. Non-qualified withdrawals are taxable and subject to a 20% penalty, unless you’re 65+, disabled, or after death.
Investment rules:
- No life insurance or collectibles.
- Assets can’t be commingled except in common funds.
- Prohibited transactions (e.g., borrowing from the account) are forbidden.
Upon death, if your spouse is the beneficiary, the HSA becomes theirs. For non-spouses, it ceases to be an HSA, and the value is taxable.
Common FAQs About IRS Form 5305-B and HSAs
Can I use Form 5305-B if I’m self-employed?
Yes, as long as you meet eligibility rules. Self-employed individuals can deduct contributions on their tax return.
What if I exceed contribution limits?
Notify your trustee to withdraw the excess plus earnings to avoid the 6% excise tax.
Are HSAs available through employers?
Many employers offer HSAs as a benefit, sometimes with matching contributions. Form 5305-B can be used in these setups.
How do recent changes affect 2026 HSAs?
OBBBA expands eligibility to bronze/catastrophic plans and allows DPC fees, making HSAs more accessible.
For the latest form and details, download the PDF from the IRS website: https://www.irs.gov/pub/irs-pdf/f5305b.pdf.
Conclusion: Start Your HSA Journey with Form 5305-B
IRS Form 5305-B provides a straightforward path to establishing a tax-advantaged Health Savings Trust Account. With rising healthcare costs, an HSA can be a smart addition to your financial plan, especially with 2026’s expanded eligibility and higher limits. Consult a tax professional or financial advisor to ensure it fits your situation, and always use trusted IRS resources for the most current information. By setting up your HSA today, you’re investing in a healthier financial future.