HSA tax surprises for 2026 from bronze plans to deductions

A new rule for 2026 treats qualifying bronze and catastrophic health plans in the individual market as high-deductible health plans (HDHPs) for health savings account (HSA) purposes, even when they don't meet the usual deductible and out-of-pocket limits.

The following questions from tax pros address HSA eligibility and how contributions should be handled on a client's tax return.

Can a taxpayer with Marketplace coverage contribute to an HSA?

Yes, if the coverage qualifies and the taxpayer meets the other HSA eligibility requirements. Beginning Jan. 1, 2026, bronze and catastrophic plans available as individual coverage through an Exchange are treated as HDHPs for HSA purposes, even if they do not satisfy the ordinary deductible and out-of-pocket thresholds.

The plan need not be purchased on an Exchange. Notice 2026-5 extends this treatment to qualifying individual-market plans bought off-Exchange and provides limited relief when a purchaser has no reason to believe the coverage is unavailable through an Exchange.

However, bronze plans offered through the Small Business Health Options Program (SHOP) do not qualify under this special rule merely because they are bronze. SHOP provides group health coverage through small employers.

The taxpayer also cannot be enrolled in Medicare or be eligible to be claimed as another taxpayer's dependent. Certain other health coverage can disqualify the taxpayer, including a general-purpose health flexible spending arrangement, even when the bronze or catastrophic policy itself qualifies.

How is the HSA limit calculated for partial-year eligibility?

Generally, eligibility is tested on the first day of each month. The contribution limit is based on one-twelfth of the applicable annual limit for each eligible month, taking into account the coverage type and any prorated age-55 catch-up contribution. For 2026, the regular limits are $4,400 for self-only coverage and $8,750 for family coverage.

For example, a taxpayer eligible under self-only coverage from January through June, but ineligible beginning July 1, has a $2,200 regular limit (⁶⁄₁₂ × $4,400), before any catch-up amount.

The last-month rule may allow a full-year contribution when the taxpayer is eligible on Dec. 1. However, the taxpayer must remain HSA-eligible through Dec. 31 of the following year.

For someone using the rule in 2026, that means staying eligible through Dec. 31, 2027. If eligibility ends before then, other than because of death or disability, the extra contribution allowed only under the last-month rule becomes taxable income in the year eligibility is lost and is subject to a 10% additional tax.

What does Form W-2, Code W mean for the HSA deduction?

For employees other than more-than-2% S corporation shareholder-employees, Form W-2, Wage and Tax Statement, Box 12, Code W includes employer HSA contributions and employee contributions made through a §125 cafeteria plan. Both are treated as employer contributions for HSA purposes and cannot be deducted again on the individual's return.

Report those amounts as employer contributions on Form 8889, Health Savings Accounts (HSAs). Direct contributions made separately with after-tax funds may qualify for a deduction, but all contributions count toward the applicable annual limit.

How are HSA contributions handled for more-than-2% S corporation shareholders?

Unlike ordinary tax-free employer contributions, an S corporation's HSA contribution for services rendered to a more-than-2% shareholder-employee is included in the shareholder's gross income. The corporation may deduct the expense under §162 when it meets the requirements, and the amount is included in Form W-2, Box 1.

The shareholder remains an employee for employment tax purposes. If §3121(a)(2)(B) applies, the contribution is not subject to Social Security and Medicare taxes. The shareholder may claim an individual HSA deduction under §223 if otherwise eligible and within the contribution limit. However, more-than-2% shareholders cannot make pre-tax HSA salary-reduction contributions through a §125 cafeteria plan.

Is the family HSA limit always twice self-only, less $50? Does a second HSA raise the limit?

No to both. The IRS inflation-adjusts and rounds the self-only and family HSA contribution limits separately. In 2024, the family limit was exactly twice the self-only limit. For 2026, $8,750 is $50 less than twice $4,400.

An eligible individual may maintain more than one HSA, including an account opened outside an employer arrangement. Contributions across those accounts are aggregated against the same annual limit. Opening another HSA does not create additional contribution room.

Explore more adjustments to gross income

HSAs are just one of the topics covered in NATP's 2026 Adjustments to Gross Income for Individuals on-demand webinar. The webinar also examines education-related deductions and moving expenses and is part of NATP's education supporting the Accredited Individual Tax Professional (AITP) credential.