Written by Ting Jiang, CPA, M.S.
The One Big Beautiful Bill Act (OBBBA) was signed into law by President Trump in July 2025. The bill introduces significant changes to the tax code for the American people. One of the most notable changes is the expansion of the Health Savings Account (HSA).
An HSA is a tax-advantaged savings account used for medical expenses. Many refer to it as a “triple tax free” account because contributions are tax free, growth is tax free, and the distributions for qualified medical expenses are also tax free.
Under the new provision, the government made three expansions to the HSA rule:
- Permanent Telehealth Coverage
Effective January 1, 2025, the ability for individuals to receive telehealth and other remote care services before meeting the deductible while still being able to have an HSA becomes permanent. Previously, telehealth coverage was allowed under the CARES Act, which expired at the end of 2024.
- Bronze and Catastrophic Plans Qualify as HDHPs
Before the provision, all bronze and catastrophic plans were not treated as High-Deductible Health Plans (HDHP), making people ineligible to have an HSA. Effective January 1, 2026, those plans will be considered as HDHPs, allowing more people to be eligible to open an HSA account.
- Direct Primary Care Services Arrangements (DPCSAs)
DPCSAs charge a fixed fee per month, and they provide a range of medical services such as physical examinations, urgent care, lab testing, etc. Before January 1, 2026, if you had DPCSAs, you would be disqualified for an HSA since the coverage is considered “a health plan that provides coverage before the minimum annual deductible is satisfied and that is not disregarded coverage or preventive care” (IRS Notice 2026-5). Under the new provisions, DPCSAs will be HSA-compatible if the monthly fee is below the cap amount of $150 (individuals) or $300 (families). If fees exceed the limit, then the taxpayer will be disqualified for an HSA. The cap amounts are subject to change with inflation each year.
Taxpayers should review the health plan to determine HSA eligibility. If eligible, it is recommended to open an HSA though an employer-sponsored plan or individually. Understanding how to qualify for an HSA and the triple tax benefit from it is essential. This provision targets middle- to lower-income earners who previously did not have HDHP coverage, and it helps more individuals and families access the tax benefits from the HSA.
At Darnall Sikes and Frederick, we recommend being informed about the new tax law changes and how you can benefit from it. The HSA Expansion offers more people the tax benefits of having an HSA. Reach out if you have any concerns or questions.
Reference:
- (Source: IRS Notice 2026-5) www.irs.gov/pub/irs-drop/n-26-05.pdf
- (Source: IRS – One, Big, Beautiful Bill Provisions) https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions
- (Source: IR-2055-119) https://www.irs.gov/newsroom/treasury-irs-provide-guidance-on-new-tax-benefits-for-health-savings-account-participants-under-the-one-big-beautiful-bill