Health Savings Accounts (HSAs) are tax-advantaged tools that allow individuals with high-deductible health plans (HDHPs) to save for medical expenses.
Each year, the IRS adjusts HSA contribution limits to account for inflation, and understanding these limits is crucial for maximizing the tax benefits associated with your HSA. Here’s what you need to know about HSA contribution limits for 2024 and 2025.
HSA Overview
HSAs offer three primary tax benefits:
- Contributions are tax-deductible.
- Earnings grow tax-free.
- Withdrawals for qualified medical expenses are tax-free.
Unlike Flexible Spending Accounts (FSAs), HSAs don’t have a “use-it-or-lose-it” rule, meaning your contributions roll over year after year. You also retain ownership of the account if you change jobs.
2024 HSA Contribution Limits
The IRS has set the following HSA contribution limits for 2024:
- Self-only coverage: Up to $4,150.
- Family coverage: Up to $8,300.
- Catch-up contribution: An additional $1,000 for individuals aged 55 or older.
If you are not enrolled in an HDHP for the entire year, you may only contribute a portion of these amounts.
However, if you’re enrolled in an eligible HDHP by December 1, you can contribute the maximum amount, provided you remain enrolled in an HDHP through the end of the following year to avoid penalties.
2025 HSA Contribution Limits
The IRS has increased the HSA contribution limits for 2025 as follows:
- Self-only coverage: Up to $4,300.
- Family coverage: Up to $8,550.
- Catch-up contribution: The catch-up contribution for individuals 55 and older remains at $1,000.
These adjustments help account for inflation, allowing you to save more in your HSA over time.
Year | Self-only Limit | Family Limit | Catch-up (55+) |
---|---|---|---|
2025 | $4,300 | $8,550 | $1,000 |
2024 | $4,150 | $8,300 | $1,000 |
2023 | $3,850 | $7,750 | $1,000 |
HSA Eligibility Requirements
To contribute to an HSA, you must:
- Have an eligible HDHP.
- Not be covered by any other health plan (with a few exceptions).
- Not be enrolled in Medicare.
- Not be claimed as a dependent on someone else’s tax return.
2024 HDHP Requirements:
- Minimum deductible: $1,600 for individuals and $3,200 for families.
- Out-of-pocket maximum: $8,050 for individuals and $16,100 for families.
Benefits of Using an HSA in Retirement
After age 65, HSAs can be used for non-medical expenses without the 20% penalty that applies to younger individuals, though distributions for non-medical expenses are subject to ordinary income tax.
HSAs are also useful for covering Medicare premiums and other healthcare costs in retirement.
Penalties for Excess Contributions
Contributing more than the allowable limit results in a 6% excise tax on the excess amount for each year it remains in your HSA.
Additionally, withdrawals for non-qualified medical expenses before age 65 are subject to both taxes and a 20% penalty.
Using HSAs Strategically
HSAs can also serve as an investment vehicle for retirement, as contributions grow tax-free and can be withdrawn tax-free for qualified medical expenses.
Younger, healthy individuals with lower healthcare costs may find an HDHP with an HSA to be a valuable long-term savings strategy.
HSAs offer significant tax advantages, but it’s crucial to stay aware of the annual contribution limits and eligibility requirements.
The IRS adjusts these limits yearly, with the 2024 and 2025 contribution limits reflecting the increasing cost of healthcare. Maximizing your HSA contributions can help you save for both current and future medical expenses while reducing your taxable income.
FAQs
What are the HSA contribution limits for 2024?
For 2024, the limits are $4,150 for self-only coverage and $8,300 for family coverage.
How much can I contribute to an HSA in 2025?
In 2025, you can contribute up to $4,300 for self-only coverage and $8,550 for family coverage.
Can I use an HSA after age 65 for non-medical expenses?
Yes, after age 65, you can use HSA funds for non-medical expenses without penalties, but taxes apply.
What happens if I over-contribute to my HSA?
Excess contributions are subject to a 6% excise tax each year they remain in your HSA.
What is the catch-up contribution for HSA accounts?
Individuals 55 and older can contribute an extra $1,000 annually to their HSA.