When your HSA balance is $0, the account itself does not disappear. Federal law keeps it in effect as a tax-exempt trust regardless of what sits inside it, so you can still receive tax-free distributions for qualified medical expenses once money goes back in, and you can still contribute if you have eligible coverage.1Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts The risks come from the edges: monthly fees that keep hitting an empty account, custodians that close inactive accounts, and a few tax traps if a negative balance builds up.
The Account Stays Open and Tax-Exempt
An HSA is a trust or custodial account created for qualified medical expenses, and it remains tax-exempt as long as it remains an HSA. Balance is not part of that definition.1Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts
The date your account was first opened, called the established date, matters more than the balance. You can only reimburse yourself tax-free for medical expenses that occurred after that date. A zero balance does not reset or erase it. Only a full account closure does.
Fees Keep Coming Against an Empty Account
Many custodians charge monthly maintenance fees, commonly $2.50 to $4.50 for low-balance accounts. Whether those charges continue when the balance hits zero depends on your custodial agreement — the contract you signed when you opened the account. If the agreement lets the custodian keep charging fees against an empty account, those charges can accumulate into a balance you owe.
Some custodians waive maintenance fees once the balance clears a threshold, often somewhere between $2,000 and $5,000. At zero you will not qualify. And if the custodian also charges an account closure fee, typically $20 to $25, that can apply on top of accumulated maintenance charges if you later close or transfer the account.
One piece of good news on the tax side: administration and maintenance fees withdrawn by the trustee are not reported as distributions from your HSA.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans They are a matter between you and the bank, not money you took out for tax purposes.
Why a Negative Balance Is a Bigger Problem
A negative HSA balance is more than an overdraft. The IRS lists lending money between you and your HSA as a prohibited transaction.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans When a custodian lets fees push your balance below zero, that arrangement can look like an extension of credit — money flowing out of an account with nothing in it.
If the IRS treats a negative balance as a prohibited transaction, your HSA stops being an HSA as of January 1 of the year the violation occurred. The entire account balance as of that date is treated as a taxable distribution, and the custodian must report it on Form 1099-SA.3Internal Revenue Service. Instructions for Forms 1099-SA and 5498-SA On top of ordinary income tax, you would owe an additional 20 percent tax unless you are 65 or older or disabled.1Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts
Practically, if your balance is at zero and fees are still hitting, call your custodian. Either fund the account or close it before a negative balance accumulates.
You Can Still Reimburse Yourself Later
An empty account does not cost you the right to reimburse yourself for medical costs you paid out of pocket. The IRS allows tax-free distributions for qualified medical expenses incurred after the account was established.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans The expense has to have occurred while the account legally existed, not while it held money.
There is no federal deadline for requesting reimbursement. You can pay a medical bill out of pocket today and reimburse yourself months, years, or decades later once the account is funded again. Deposit new contributions, then take a distribution matching a documented expense. Only distributions matching qualified medical expenses escape income tax and the 20 percent additional tax.4Internal Revenue Service. Instructions for Form 8889 (2025)
Recordkeeping is what makes this work. Keep itemized receipts, explanations of benefits from your insurer, and any documentation showing the date of service, the amount you paid, and that insurance did not reimburse the expense. You do not file these with your tax return, but you need them if the return is examined.
Contributing Again
Your ability to contribute depends on your health insurance, not your balance. As long as you are enrolled in a qualifying high deductible health plan, you can contribute whether the balance is zero or six figures. For 2026, the annual contribution limits are:
- Self-only coverage: $4,400
- Family coverage: $8,750
- Catch-up contribution (age 55 or older): an additional $1,000
These limits come from Rev. Proc. 2025-19.5Internal Revenue Service. Revenue Procedure 2025-19 – 2026 HSA Limits If you lose your high deductible plan by switching to a traditional PPO or enrolling in Medicare, you can no longer contribute. The account stays open, and you can still take tax-free distributions for qualified expenses. Contributions can resume if you regain eligible coverage.
Starting January 1, 2026, the One, Big, Beautiful Bill Act expands who can contribute. Two changes matter if you assumed you were shut out:
- Bronze and catastrophic plans: Bronze-level or catastrophic coverage, whether bought through an exchange or directly from an insurer, now counts as HSA-compatible even if it does not meet the traditional high deductible plan definition.
- Direct primary care arrangements: Paying a periodic fee for a direct primary care provider no longer blocks HSA contributions. Those periodic fees also count as qualified medical expenses payable from HSA funds.
Some people who previously could not contribute can now refund a zero-balance HSA.6Internal Revenue Service. Treasury, IRS Provide Guidance on New Tax Benefits for Health Savings Account Participants Under the One Big Beautiful Bill
If You Leave the Job That Set Up the Account
Your HSA belongs to you, not your employer. Leaving a job does not close the account or change its tax status, even at a zero balance. You can leave it where it is, keep using it for qualified expenses, and contribute if you carry eligible coverage on your own.
The change is on fees. If your employer was covering account maintenance as a benefit, you take those over after separation. On a zero-balance account, that can slide toward the negative-balance problems above. Two options: fund the account enough to keep it active and potentially clear a fee waiver, or transfer the balance, even if zero, to a custodian with lower or no fees. Transfers between HSA custodians are generally unlimited and free on the receiving end, though your current custodian may charge a closing fee.
Custodians Can Close Inactive Accounts
A zero-balance HSA can be closed by the custodian after a stretch of inactivity, often six months to a year with no deposits, withdrawals, or other transactions. Before closing the account, the custodian will typically send written notice giving you a window, often 30 to 60 days, to deposit funds or perform a transaction.
Because there are no funds, state abandoned-property laws generally do not apply. The custodian simply terminates the account administratively.
The cost of closure is more than losing a place to save. You lose the established date. Any future HSA you open will have a new one, and medical expenses that occurred between the closure of the old account and the opening of a new one will not qualify for tax-free reimbursement.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans If preserving that date matters to you, a small deposit or a nominal transaction before the inactivity window closes is the simplest way to hold onto it.