2021 HSA Contribution Limits and Requirements
Review the specific 2021 IRS guidelines for HSAs, detailing the contribution amounts and the health plan deductibles required for eligibility that year.
A Health Savings Account (HSA) is a tax-advantaged savings account paired with a high-deductible health plan. Funds contributed to an HSA can be used for qualified medical expenses, allowing individuals to set aside money for healthcare on a pre-tax basis. The Internal Revenue Service (IRS) sets annual contribution limits and defines the requirements for the health plans that must accompany them.
HSA Contribution Limits
For an individual with self-only coverage under a qualifying health plan, the maximum contribution is $4,300. This limit applies to the total contributions made by the account holder and any employer. For individuals with family coverage, the total contribution limit is $8,550. This single limit applies to the family, regardless of how many members are covered.
These funds can be placed into a single account or split among multiple accounts for different family members, but the total cannot exceed the family maximum. Individuals aged 55 or older are permitted to contribute an extra $1,000 as a “catch-up” contribution. If both spouses in a family plan are 55 or older, each can make a $1,000 catch-up contribution, but these funds must be deposited into separate HSA accounts.
High Deductible Health Plan Requirements
To be eligible to contribute to an HSA, an individual must be enrolled in a qualifying High Deductible Health Plan (HDHP). For self-only coverage, the minimum deductible is $1,650. For a health plan to qualify as an HDHP with family coverage, it must have a minimum annual deductible of at least $3,300. A plan will not qualify if it pays for benefits, other than preventive care, before this family deductible is met.
In addition to minimum deductibles, the IRS also sets a cap on total annual out-of-pocket expenses for these plans. The maximum out-of-pocket amount for self-only coverage, which includes deductibles, copayments, and other coinsurance, is $8,300. For family coverage, this maximum is set at $16,600.
Consequences of Exceeding Contribution Limits
Making contributions to an HSA beyond the established limits results in tax penalties. These excess contributions are not tax-deductible and are subject to a 6% excise tax. This tax is levied for each year that the excess amount remains in the account. The penalty is reported using IRS Form 5329.
The 6% excise tax continues to apply annually until the excess funds are removed. To avoid this penalty, the taxpayer must withdraw the excess contribution amount before the tax filing deadline for the year the contribution was made. Any earnings or interest generated by the excess contribution must also be withdrawn. These earnings must be reported as “other income” on the taxpayer’s tax return for the year they are withdrawn.