How Much Can You Contribute to an HSA?

A Health Savings Account (HSA) provides a tax-advantaged savings mechanism specifically designed for healthcare expenses. This account is paired with a high-deductible health plan (HDHP), allowing individuals to save and pay for qualified medical costs with pre-tax dollars. The funds within an HSA can grow tax-free and withdrawals for eligible medical expenses are also tax-free, offering a triple tax benefit. This financial tool helps individuals manage current healthcare needs while also saving for future medical costs.

Determining Your Eligibility

Eligibility for contributing to an HSA is directly tied to your health insurance coverage. To be considered an eligible individual, you must be covered by a high-deductible health plan (HDHP) that meets specific Internal Revenue Service (IRS) criteria. For 2025, an HDHP must have a minimum annual deductible of at least $1,650 for self-only coverage or $3,300 for family coverage. Additionally, the plan’s annual out-of-pocket maximum, which includes deductibles, co-payments, and coinsurance but not premiums, cannot exceed $8,300 for self-only coverage or $16,600 for family coverage.

You cannot be covered by other health insurance that is not an HDHP, with exceptions for limited-purpose coverage like dental or vision. You also cannot be enrolled in Medicare, nor can you be claimed as a dependent on someone else’s tax return. Meeting these eligibility requirements is a prerequisite for contributing to an HSA.

Understanding Annual Contribution Limits

The IRS sets specific maximum limits on how much an individual can contribute to an HSA each year. These limits are adjusted annually for inflation to reflect changes in healthcare costs. For the 2025 tax year, the maximum amount an individual can contribute if covered by a self-only HDHP is $4,300.

For individuals covered by a family HDHP, the maximum contribution limit for 2025 is $8,550. These limits encompass all contributions made to the HSA from any source. Individuals aged 55 and older are permitted to contribute an additional $1,000 annually as a catch-up contribution.

Factors Influencing Your Contribution Amount

Several factors can influence your HSA contribution amount. If you are eligible for an HSA for only a portion of the year, your contribution limit will be prorated. For instance, if you become HSA-eligible mid-year, your maximum contribution is calculated based on the number of months you were eligible, determined by your coverage status on the first day of each month.

If you maintain HDHP coverage for the entire calendar year, you can contribute the full annual amount. However, if you lose eligibility mid-year, specific rules may apply regarding prior contributions.

Contributions made by an employer to an employee’s HSA also count towards the annual IRS limit. For example, if an employer contributes $1,000, that employee’s personal contribution room is reduced by that amount. The combined total from both the individual and their employer cannot exceed the applicable annual maximum.

Married couples, even if covered by the same family HDHP, must open separate HSAs, as joint accounts are not permitted. Both spouses can contribute up to the family limit, and if one spouse is 55 or older, they can also make the additional $1,000 catch-up contribution to their own separate HSA.

Making and Managing Contributions

Once eligibility is established and the appropriate contribution amount determined, there are several methods for funding an HSA. Many individuals contribute through payroll deductions, which offer the benefit of being pre-tax, meaning the money is deducted from your gross pay before taxes are calculated. This reduces your taxable income, providing an immediate tax saving.

Alternatively, individuals can make direct contributions to their HSA custodian, and these amounts can be deducted on their tax return, even if they do not itemize deductions.

HSAs are offered by various financial institutions, including banks, credit unions, and investment firms. When choosing a custodian, it is beneficial to consider factors such as administrative fees, available investment options for your funds, and the ease of accessing your account.

Contributions for a given tax year can be made until the tax filing deadline of the following year, April 15.

Addressing Excess Contributions

Contributing more than the allowable maximum to an HSA can lead to specific tax consequences. Any amount contributed in excess of the annual limit is not tax-deductible. These excess contributions are also subject to a 6% excise tax for each year they remain in the account. This penalty applies every year until the excess amount is removed.

To avoid the excise tax, remove excess contributions and any attributable earnings before the tax filing deadline for the year in which the excess occurred.

The earnings on the excess contribution must be included in gross income for the year they are distributed. If not removed by the deadline, the excise tax will be assessed on Form 5329.