Are HSA Contributions Tax Deductible?

A Health Savings Account (HSA) allows individuals with specific health insurance plans to save for medical expenses with tax advantages. Contributions to an HSA are tax-deductible, meaning they can lower your taxable income for the year. This deduction is an “above-the-line” deduction, which directly reduces your adjusted gross income (AGI). A lower AGI can help you qualify for other tax deductions and credits, and the funds in the account grow and can be withdrawn tax-free for qualified medical expenses.

Eligibility for an HSA

To contribute to an HSA, an individual must be covered by a High-Deductible Health Plan (HDHP). An HDHP is a health insurance plan with a higher deductible than traditional plans. The Internal Revenue Service (IRS) sets annual minimums for these deductibles and maximums for out-of-pocket spending. For 2025, an HDHP must have a minimum annual deductible of $1,650 for self-only coverage or $3,300 for family coverage.

In addition to the deductible requirements, the plan must also cap total annual out-of-pocket expenses. For 2025, these limits are $8,300 for self-only coverage and $16,600 for family coverage. This cap includes deductibles, copayments, and coinsurance but does not include insurance premiums.

Several other factors can disqualify an individual from contributing to an HSA. You cannot contribute if you are enrolled in any part of Medicare or claimed as a dependent on another person’s tax return. Having other health coverage that is not an HDHP also makes you ineligible.

HSA Contribution and Deduction Limits

The IRS limits the amount you can contribute to an HSA and deduct from your taxes annually. These limits depend on whether you have self-only or family HDHP coverage. For the 2025 tax year, the maximum contribution for an individual with self-only coverage is $4,300. For those with family coverage, the limit is $8,550.

These contribution limits apply to the total amount deposited into the account for the year, including contributions made by you, your employer, or any other person. Any amount contributed over the limit is considered an excess contribution and may be subject to a 6% excise tax.

Individuals age 55 or older by the end of the tax year can make an additional “catch-up” contribution of $1,000 per year. If both you and your spouse are 55 or older and each have your own HSA, you can both make a $1,000 catch-up contribution to your respective accounts. Contributions for a given tax year can be made up until the tax filing deadline, which is typically April 15 of the following year.

Claiming the HSA Deduction on Your Tax Return

To claim the HSA deduction, you must file Form 8889 with your federal income tax return. Your HSA custodian will send you Form 5498-SA, which reports the total contributions made to your account for the year. If you took money out of your HSA, you will receive Form 1099-SA. Employer contributions are often reported in Box 12 with code W on your Form W-2.

The process of calculating your deduction takes place in Part I of Form 8889. The form guides you through a calculation to determine your maximum allowable contribution based on your health plan coverage and months of eligibility. Employer contributions are also factored into this calculation.

After a series of calculations, the final deductible amount is determined on Form 8889. This amount is the lesser of your actual contributions or your calculated contribution limit for the year. This final deduction figure is then transferred from Form 8889 to Schedule 1 of your Form 1040, where it reduces your total income.

State Tax Considerations

While HSA contributions are deductible on your federal tax return, the tax treatment at the state level is not uniform. Most states conform to the federal rules, allowing you to deduct your HSA contributions on your state income tax return as well.

A few states do not follow the federal guidelines regarding HSA deductions. California and New Jersey do not permit a state tax deduction for contributions made to an HSA. In these states, the amount you contributed must be added back to your income when you file your state tax return.

For residents of these non-conforming states, the earnings and interest generated by the funds within the HSA may also be subject to state income tax. This is a consideration for taxpayers in these locations as it impacts financial planning.