IRS Publication 969 – IRS Forms, Instructions, Pubs 2026 – In today’s rising healthcare landscape, tax-advantaged accounts like Health Savings Accounts (HSAs) and Flexible Spending Arrangements (FSAs) offer valuable ways to manage medical expenses while reducing your tax burden. IRS Publication 969 serves as the definitive guide to these programs, outlining eligibility, contribution limits, tax benefits, and more. Whether you’re exploring HSAs for the first time or comparing options like Archer MSAs and HRAs, this article breaks down the key details from trusted sources to help you make informed decisions. Updated for the 2025 tax year, we’ll cover everything you need to know about these tax-favored health plans.
What Is IRS Publication 969?
IRS Publication 969, titled “Health Savings Accounts and Other Tax-Favored Health Plans,” is an official document from the Internal Revenue Service that explains various programs designed to provide tax advantages for offsetting healthcare costs. These include HSAs, Archer Medical Savings Accounts (Archer MSAs), Medicare Advantage MSAs, Health Flexible Spending Arrangements (FSAs), and Health Reimbursement Arrangements (HRAs). The publication helps individuals, employers, and self-employed people understand how to use these accounts to deduct contributions, earn tax-free growth, and withdraw funds tax-free for qualified medical expenses.
Published annually, the latest version (for 2025) incorporates updates such as expanded preventive care definitions and rules for telehealth services. It’s essential reading for anyone enrolled in a high-deductible health plan (HDHP) or considering tax strategies for medical bills. Qualified medical expenses generally align with those deductible under section 213(d) of the Internal Revenue Code, including doctor visits, prescriptions, and even menstrual products.
Health Savings Accounts (HSAs): Eligibility, Contributions, and Benefits
Health Savings Accounts (HSAs) are among the most popular tax-favored health plans, allowing you to save pre-tax dollars for medical expenses. An HSA is a tax-exempt trust or custodial account set up with a qualified trustee, such as a bank or insurance company, to pay or reimburse qualified medical costs.
HSA Eligibility Requirements
To qualify for an HSA in 2025, you must:
- Be covered by a high-deductible health plan (HDHP) on the first day of the month.
- Have no other health coverage, except for permitted exceptions like workers’ compensation, dental, vision, or long-term care insurance.
- Not be enrolled in Medicare.
- Not be claimed as a dependent on someone else’s tax return.
HDHPs have specific thresholds: For 2025, the minimum annual deductible is $1,650 for self-only coverage or $3,300 for family coverage, with maximum out-of-pocket expenses of $8,300 (self-only) or $16,600 (family). These limits increase to $1,700/$3,400 (minimum deductible) and $8,500/$17,000 (out-of-pocket) for 2026. Preventive care, including certain insulin products, can be covered without meeting the deductible.
The “last-month rule” allows you to be considered eligible for the entire year if you’re covered on December 1, but you must remain eligible through a testing period to avoid penalties.
HSA Contribution Limits and Rules
Contributions to an HSA can come from you, your employer, or others, and must be in cash. For 2025:
- Self-only coverage: Up to $4,300.
- Family coverage: Up to $8,550.
- Catch-up contribution: An extra $1,000 if you’re 55 or older.
These limits are reduced by any employer contributions or if you’re enrolled in Medicare. You can make contributions until April 15, 2026, for the 2025 tax year. Excess contributions incur a 6% excise tax unless withdrawn.
HSAs offer triple tax advantages:
- Contributions are deductible (or excluded from income if employer-made).
- Earnings grow tax-free.
- Distributions are tax-free for qualified expenses, such as medical care, prescriptions, and hospital costs (not most insurance premiums, except in specific cases like COBRA or long-term care).
Non-qualified distributions before age 65 are taxable and subject to a 20% penalty, with exceptions for death, disability, or reaching age 65. HSAs are portable, meaning you keep the account even if you change jobs.
To visualize how an HSA works alongside your health plan:
Recent updates include disregarding telehealth services for HDHP eligibility after 2024 and expanding preventive care to cover over-the-counter contraceptives and condoms.
Reporting HSAs on Your Taxes
File Form 8889 with your Form 1040 to report contributions and distributions. Trustees report on Form 5498-SA, and employers use code “W” on your W-2.
Archer Medical Savings Accounts (Archer MSAs)
Archer MSAs are similar to HSAs but more limited, primarily for small employers (50 or fewer employees) or self-employed individuals with an HDHP. No new Archer MSAs have been allowed since 2007 unless you had one previously.
Eligibility and HDHP Requirements
You must have an HDHP with a minimum deductible of $2,850 (self-only) or $5,700 (family) for 2025, up to a maximum deductible of $4,300/$8,550 and out-of-pocket of $5,700/$10,500.
Contributions and Distributions
Contributions are limited to 65% (self-only) or 75% (family) of the deductible, made by either you or your employer (not both in the same year). Distributions are tax-free for qualified medical expenses, with a 20% penalty on non-qualified ones (exceptions apply).
Rollovers to HSAs are allowed tax-free. Report on Form 8853.
Flexible Spending Arrangements (FSAs)
FSAs, including health and dependent care versions, are employer-sponsored plans funded through salary reductions. They’re not available to self-employed individuals.
Health FSA Key Details
- Contribution limit: Up to $3,300 for 2025.
- Use for qualified expenses like medical care for you, your spouse, dependents, or children under 27.
- “Use-it-or-lose-it” rule applies, but employers can offer a 2.5-month grace period or $660 carryover (not both).
Reimbursements require substantiation, and debit cards are permitted. Employer contributions are excluded from income.
Health Reimbursement Arrangements (HRAs)
HRAs are fully employer-funded and reimburse qualified medical expenses, including premiums. There’s no contribution limit, and unused funds carry over. Distributions are tax-free if used properly; otherwise, they’re taxable.
Medicare Advantage MSAs and Other Plans
Medicare Advantage MSAs are for Medicare enrollees, with contributions only from Medicare. Distributions are tax-free for qualified expenses. Publication 969 doesn’t detail additional plans beyond these.
HSA vs. FSA vs. HRA: Which Is Right for You?
- HSA: Best for those with HDHPs; portable and investable with triple tax benefits.
- FSA: Ideal for predictable expenses; use-it-or-lose-it but easier access.
- HRA: Employer-controlled; great for premium reimbursements.
Consult IRS Publication 502 for a full list of qualified expenses. Always review your situation with a tax professional.
For a quick overview of HSA contribution limits and uses:
Conclusion: Maximizing Tax Savings on Healthcare
IRS Publication 969 is your go-to resource for navigating tax-favored health plans like HSAs, which can significantly lower your healthcare costs through smart tax strategies. With contribution limits adjusting annually and ongoing updates for preventive care, staying informed ensures you don’t miss out on these benefits. Download the full publication from the IRS website for detailed forms and examples. If you’re eligible, starting an HSA today could be a game-changer for your financial health.