How Much to Contribute to Health Savings Account?

A Health Savings Account, or HSA, is a tax-advantaged savings vehicle available to individuals enrolled in specific health insurance plans. It allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. This account offers a triple tax advantage: contributions are tax-deductible, the funds grow tax-free, and withdrawals for qualified medical costs are also tax-free. This guide covers the specifics of eligibility, contribution limits, and other regulations to help you determine your appropriate contribution amount.

Determining Your Eligibility to Contribute

To contribute to an HSA, you must be covered by a qualified high-deductible health plan (HDHP) on the first day of a given month. An HDHP is a type of health insurance that has a higher deductible than traditional insurance plans. For the 2025 tax year, the Internal Revenue Service (IRS) defines an HDHP as a plan with a minimum annual deductible of $1,650 for self-only coverage or $3,300 for family coverage. These plans also have a maximum out-of-pocket amount of $8,300 for self-only coverage and $16,600 for family coverage, which includes deductibles and copayments but not premiums. You should confirm with your insurance provider that your plan is HSA-qualified.

Beyond having an HDHP, there are other criteria for HSA eligibility. You cannot be enrolled in Medicare, nor can you be claimed as a dependent on another person’s tax return. You also cannot have other health coverage, although certain permitted coverage for vision, dental, or disability insurance does not disqualify you.

Annual Contribution Limits

The IRS sets annual limits on the amount of money that can be contributed to an HSA. For the 2025 tax year, individuals with self-only HDHP coverage can contribute up to $4,300. For those with family HDHP coverage, the maximum contribution is $8,550. These limits are adjusted periodically for inflation.

A catch-up contribution is available for older individuals. If you are age 55 or older by the end of the tax year, you are permitted to contribute an additional $1,000 annually. This means an eligible individual with self-only coverage could contribute up to $5,300 in 2025, while someone with family coverage could contribute up to $9,550. This provision is designed to help those nearing retirement bolster their healthcare savings.

Any contributions made by an employer count toward your annual maximum limit. For example, if you have family coverage with an $8,550 limit for 2025 and your employer contributes $1,000 to your account, the maximum you can personally contribute is $7,550. You must coordinate your own contributions with any amount provided by your employer to avoid exceeding the annual cap.

Calculating Your Personal Contribution Amount

The amount you can contribute may need to be adjusted if you were not eligible for the entire year. If you become eligible for an HSA mid-year, your contribution limit is prorated based on the number of months you were covered by an HDHP. The calculation involves dividing the annual limit by 12 and multiplying it by the number of months you were eligible. For instance, if you had self-only coverage for the last four months of the year, your maximum contribution would be ($4,300 / 12) 4, which is about $1,433.

An exception to this proration is the “last-month rule.” This IRS rule allows you to contribute the full maximum for the year if you are an eligible individual on December 1. To use this rule, you must remain HSA-eligible throughout a “testing period,” which runs from December 1 of the contribution year through December 31 of the following year. Failing to remain eligible during this period has consequences, including having to report the extra contributions as income and paying a 10% penalty tax.

Specific rules also apply to married couples. If both spouses have self-only HDHP coverage, they can each contribute up to the self-only limit in their respective HSAs. If one or both spouses have family coverage, the total contribution limit for the couple is the family maximum of $8,550 for 2025. This amount can be divided between their separate HSAs, but the combined total cannot exceed the family limit. The deadline to make HSA contributions for a given tax year is the federal tax filing deadline, April 15 of the following year.

Handling Excess Contributions

Accidentally contributing more than the annual limit can happen, especially when coordinating personal and employer contributions. These over-contributions are known as excess contributions and are subject to a 6% excise tax for each year the excess amount remains in the account. This tax is reported using IRS Form 5329.

To avoid this penalty, you must withdraw the excess contribution before the tax filing deadline for the year the contribution was made. When you withdraw the excess amount, you must also withdraw any net income attributable to it, such as interest or capital gains. This withdrawn income must be reported as “Other Income” on your tax return for the year you withdraw it.

Your HSA custodian or trustee can help you calculate the amount of attributable net income that needs to be withdrawn. By taking these corrective steps before the tax deadline, you can avoid the 6% excise tax. If you miss the deadline, you will owe the tax for that year and each subsequent year until the excess is corrected.