New legislation boosts savings limits and expands eligible expenses for millions of Americans
A sweeping tax package recently passed by the House of Representatives is making headlines for its broad changes to the U.S. tax code—but one of its most impactful sections centers on health-related savings accounts. If signed into law, the bill would significantly enhance the flexibility, value, and accessibility of Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) starting in 2026.
📣 Update – July 2025: Final Tax Bill Approved by Congress – Expanded HSA/FSA Benefits Set to Become Law
In a major win for health savings, the House of Representatives has officially passed the Senate’s revised version of the 2025 tax bill — sending it to the President’s desk for signature today . This final version cements several key HSA and FSA expansions that will impact millions of Americans starting in 2026, including:
Higher HSA contribution limits , phased in over two years
Inflation-adjusted FSA rollover caps
Permanent eligibility for OTC and menstrual care products
A newly created Dependent Adult Care FSA category with up to $3,000 in eligible expenses
The legislation is expected to be signed into law imminently. Most provisions will take effect January 1, 2026 , giving employers, benefit administrators, and consumers time to adapt.
👉 Scroll down for our full breakdown of what’s in the bill and how it benefits FSA/HSA users.
Here’s a breakdown of the key FSA and HSA updates included in the bill:
1. Increased HSA Contribution Limits
Starting in 2026, HSA annual contribution limits will rise by an additional:
- $4,300 for individuals
- $8,550 for families
These increases will be subject to income-based phaseouts beginning at $75,000 for single filers and $150,000 for joint filers.
2. HSA Eligibility Expanded
The bill removes or relaxes several restrictions that previously blocked participation in HSAs:
- Spouses on General FSAs: You can now contribute to an HSA even if your spouse has a general-purpose FSA, as long as it doesn’t reimburse your own medical expenses.
- Medicare Part A Participants: Seniors enrolled only in Medicare Part A are now eligible to contribute to HSAs—something previously prohibited.
- On-Site Clinics: Employees with access to low- or no-cost on-site clinics at work will remain eligible for HSAs.
These changes are expected to open up HSA access to thousands of Americans who were previously disqualified under older IRS guidelines.
3. Fitness and Physical Activity Expenses Become Eligible
Both HSAs and FSAs will now be able to reimburse certain physical fitness costs, including:
- Gym memberships
- Instructional physical activities (e.g., dance classes, fitness boot camps)
Annual limits will apply:
- $500 per year for individuals
- $1,000 per year for families
These annual limits are paired with monthly spending limits where a maximum of 1/12 of the alloted annual spending limit can be applied per month (i.e. $41.67 each month with a $500 annual limit in place).
Important Note: The legislation does not include physical fitness equipment (like treadmills or dumbbells) as eligible—only memberships and participation-based fees.
4. New HSA Catch-Up Contribution Rule for Couples
Previously, individuals over age 55 could make a catch-up contribution to their own HSA. Now, the new bill allows both spouses to contribute their catch-up amount to a single HSA, simplifying account management for couples nearing retirement.
5. Coverage of Direct Primary Care
The bill allows HSA funds to cover Direct Primary Care (DPC) arrangements, with limits of:
- $150/month for individuals
- $300/month for families
This model—where patients pay a flat monthly fee for unlimited access to primary care—has grown in popularity but was previously considered a barrier to HSA eligibility.
6. Retroactive HSA Reimbursements Allowed (Short-Term)
The bill introduces a 60-day window, allowing users to be reimbursed from their HSA for qualified medical expenses incurred up to 60 days before they opened the account. This gives users added flexibility when starting an HSA for the first time.
7. FSA-to-HSA Rollover Option
A major benefit for people switching to a High Deductible Health Plan (HDHP): Employers may now allow unused FSA balances to roll over into an HSA, up to the standard FSA contribution limit. This helps bridge the gap for employees transitioning between plans.
When Do These Changes Take Effect?
All provisions are slated to begin in tax years starting after December 31, 2025, meaning they’ll be relevant for 2026 and beyond—assuming the Senate and President sign off on the bill.
Bottom Line
This new legislation represents a major win for individuals and families using HSAs and FSAs. From higher contribution limits to broader eligible expenses, these reforms are designed to encourage greater participation and empower Americans to take more control of their healthcare spending.
We’ll continue monitoring the bill’s progress through the Senate and provide updates as it moves forward. In the meantime, now’s a great time to start planning your savings strategy for 2026.
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