How Much Can Be Contributed to an HSA?

A Health Savings Account (HSA) is a tax-advantaged savings and investment vehicle designed to help individuals manage healthcare expenses. Funds grow tax-free and can be used for qualified medical costs without incurring taxes. It serves as a tool to save for future healthcare needs and a flexible resource for immediate medical expenditures.

HSA Eligibility Requirements

To contribute to an HSA, an individual must meet specific criteria established by the Internal Revenue Service (IRS). A requirement involves enrollment in a High-Deductible Health Plan (HDHP). For 2025, an HDHP must have a minimum annual deductible of $1,650 for self-only coverage or $3,300 for family coverage. The plan’s annual out-of-pocket expenses, which include deductibles, co-payments, and co-insurance but exclude premiums, cannot exceed $8,300 for self-only coverage or $16,600 for family coverage.

An individual cannot have other health coverage that is not an HDHP. The individual must not be enrolled in Medicare, nor can they be claimed as a dependent on someone else’s tax return. Meeting these eligibility standards on the first day of a given month allows for HSA contributions for that month.

Determining Your Maximum Contribution

The amount an individual can contribute to an HSA is subject to annual limits set by the IRS. For 2025, the maximum annual contribution is $4,300 for individuals with self-only HDHP coverage. Those with family HDHP coverage can contribute up to $8,550. These limits represent the total combined contributions from all sources, including the individual, their employer, or family members.

Individuals aged 55 and older are permitted to make an additional “catch-up” contribution. This allows them to contribute an extra $1,000 annually beyond the standard limits, provided they are not enrolled in Medicare. Therefore, an eligible individual aged 55 or older with self-only coverage could contribute $5,300, and those with family coverage could contribute $9,550 for 2025.

Contribution limits are calculated on a monthly basis; however, specific rules apply if an individual is not HSA-eligible for the entire year. If an individual becomes eligible on the first day of the last month of their tax year (December 1 for most taxpayers), they can contribute the full annual amount as if they were eligible for the entire year, under what is known as the “last-month rule”. However, utilizing this rule requires the individual to remain HSA-eligible for a “testing period” extending until December 31 of the following year. Failure to maintain eligibility during this testing period can result in the previously untaxed contributions being included in income and subjected to a 10% penalty.

How to Contribute to Your HSA

Many employers facilitate contributions through payroll deductions, which are made on a pre-tax basis. This means the money is deducted from an employee’s paycheck before taxes are calculated, providing an immediate tax benefit.

Individuals can also make direct contributions to their HSA custodian or administrator, such as a bank or financial institution. These post-tax contributions can later be deducted on the individual’s tax return, effectively reducing their taxable income. For contributions applying to a given tax year, the deadline is the federal income tax filing deadline for that year, which is April 15 of the following calendar year.

Funds can also be moved into an HSA from other HSAs or even from an Individual Retirement Account (IRA) through rollovers or transfers. An HSA-to-HSA transfer allows moving funds between accounts without limit if done as a trustee-to-trustee transfer, where funds move directly between institutions. A direct rollover, where the individual receives the funds and then redeposits them, is limited to once every 12 months, and the funds must be redeposited within 60 days to avoid penalties. A one-time, lifetime transfer from a traditional or Roth IRA to an HSA is also permissible, but this amount counts towards the annual HSA contribution limit.

Managing Excess Contributions

Contributing more than the allowed maximum to an HSA results in an “excess contribution,” which has tax implications. Identifying an excess contribution involves comparing the total amount contributed during the year, from all sources, against the IRS-mandated annual limit for which the individual is eligible. This includes any employer contributions, which count towards the individual’s overall limit.

To avoid penalties, excess contributions and any earnings attributable to them should be removed from the HSA by the individual’s tax filing deadline, including any extensions. The process involves contacting the HSA administrator to request a return of the excess funds. If the excess is removed by this deadline, it is not subject to the excise tax and is instead included in the individual’s gross income for the year it was contributed.

If excess contributions are not removed by the tax filing deadline, they are subject to a 6% excise tax for each year they remain in the account. This tax applies annually until the excess amount is corrected. Individuals must report excess contributions and calculate any associated penalties using IRS Form 5329, “Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts,” which is filed with their federal income tax return.