Tucked inside Republicans’ "big, beautiful" tax package, which passed the House early Thursday, are provisions expanding health savings accounts (HSAs), including the biggest contribution increase ever for next year, along with a range of other benefits.

Learn more: What is a health savings account (HSA)?

“It's definitely expanding HSAs with new things people can use their HSA dollars for,” Kaye L. Pestaina, vice president and director of KFF’s program on patient and consumer protection, told Yahoo Finance.

While an HSA can be a savvy way to boost savings for retirement and is considered a go-to tool by many financial planners, they were designed as a way to pay current healthcare costs, Pestaina said.

“The provisions are aimed to get rid of certain barriers for lower-income people that would allow them to double what they can contribute annually,” she said. “So it's good news, but they still need the money now even though, in theory, they could leave the money in these accounts to save for future costs.”

An HSA offers a triple tax advantage. It’s the only account that lets you put money in on a tax-free basis, lets that money build up tax-free, and lets it come out tax-free for qualified healthcare expenses. (Some states assess state taxes.)

In order to put money into an HSA, you must be enrolled in a high-deductible health plan (HDHP). In those plans, you pay a lower premium per month than other types of health insurance plans, but a heftier annual deductible (the amount you pay for covered medical costs before insurance kicks in).

For 2025, that translates to a deductible of at least $1,650 for individual coverage and $3,300 for family coverage.

You can also open an HSA as a self-employed freelancer or business owner if you have a qualified high-deductible health plan.

Some employers match contributions to HSAs, similar to employer-provided retirement savings accounts. Your contributions roll over year after year and are yours to keep when you retire or change employers.

There’s a hefty 20% penalty on any withdrawal amount not used toward a qualified medical expense, and you’ll pay income tax on the disqualified sum.

For anyone 65 or older, the penalty is gone, meaning you can withdraw funds for any purpose and only pay income tax on it if it’s not a qualified medical expense.

Here’s a rundown of the provisions included in the legislation that would be effective January 2, 2026, if signed into law:

1. Increased contribution limits. The 2025 contribution limit for an HSA is $4,300 for individuals and $8,550 for families. Individuals who are 55 or older can contribute an additional $1,000.