Is There a Limit to HSA Contributions?

Health Savings Accounts (HSAs) offer a tax-advantaged way to save and invest for qualified medical expenses. The Internal Revenue Service (IRS) establishes specific regulations and annual contribution limits for these accounts. Understanding these rules is important to maximize HSA benefits and avoid penalties.

Eligibility for HSA Contributions

To contribute to an HSA, an individual must meet specific eligibility criteria set by the IRS, primarily by being covered under a High Deductible Health Plan (HDHP). For 2025, an HDHP is defined as a health plan with a minimum annual deductible of $1,650 for self-only coverage or $3,300 for family coverage. Annual out-of-pocket expenses, including deductibles and co-payments but not premiums, cannot exceed $8,300 for self-only coverage or $16,600 for family coverage.

Beyond HDHP coverage, individuals must not be covered by any other non-HDHP health plan, with limited exceptions for vision, dental, or long-term care insurance. Enrollment in Medicare also disqualifies an individual from making HSA contributions. Additionally, an individual cannot be claimed as a dependent on another person’s tax return.

Understanding Annual Contribution Limits

For the 2025 calendar year, individuals with self-only HDHP coverage can contribute up to $4,300. Those with family HDHP coverage can contribute up to $8,550.

Individuals aged 55 and older can make an additional “catch-up” contribution of $1,000 annually. This helps older account holders save more as they approach retirement. These limits are periodically updated by the IRS.

Employer contributions to an employee’s HSA count towards the individual’s overall annual contribution limit. Track all contributions from various sources to ensure the total does not exceed the IRS maximum for the year. If an individual is eligible for only a portion of the year, the contribution limit is prorated based on the number of months they were eligible.

Handling Excess Contributions

An “excess contribution” occurs when an individual contributes more to their Health Savings Account than the allowed annual limit. Such contributions carry specific tax implications. Internal Revenue Code Section 4973 imposes a 6% excise tax on the excess amount remaining in the account at year-end.

To avoid this excise tax, excess contributions and any attributable earnings should be withdrawn from the HSA. This removal must occur by the tax filing deadline for the year the excess contribution was made, including extensions. If removed by this deadline, the excess contribution itself is generally not subject to the 6% excise tax.

However, earnings on the excess contribution are considered taxable income in the year they are distributed. If excess contributions are not removed by the tax filing deadline, the 6% excise tax will apply for each year the excess remains in the account.