What Is the Max Contribution for an HSA?

Health Savings Accounts (HSAs) are a key tool for individuals managing healthcare expenses. Offering tax advantages and flexibility, they are especially valuable for those with high-deductible health plans. Understanding contribution limits is crucial, as it determines the potential savings and tax benefits.

Contribution Tiers

The IRS sets annual HSA contribution limits, adjusting them annually for inflation and healthcare cost changes. These limits cater to individuals, families, and those eligible for catch-up contributions, enabling more effective financial planning.

Individual

For 2023, individuals with high-deductible health plans can contribute up to $3,850. Contributions can be made pre-tax through payroll deductions or post-tax with potential deductions. Staying within the limit is essential to avoid penalties. Maximizing contributions is often advised to take full advantage of tax benefits and build a reserve for medical expenses.

Family

For family coverage under a high-deductible health plan, the 2023 contribution limit is $7,750. This total can be allocated among family members based on anticipated healthcare costs. Employer contributions, if offered, count toward this limit and can help families meet it more easily. Reviewing healthcare needs ensures families make the most of their HSA.

Catch-Up

Individuals aged 55 and older can make an additional $1,000 catch-up contribution. For instance, someone aged 56 with family coverage could contribute up to $8,750 in 2023. If both spouses qualify, each can make separate catch-up contributions, providing an opportunity to boost healthcare savings before retirement.

Combined Employer and Employee Amounts

HSAs allow contributions from both employees and employers, with employer contributions counting toward annual limits. Employers may offer fixed contributions or match employee contributions, enhancing the utility of the HSA as part of a benefits package. This setup benefits employees through increased savings and employers through tax-deductible business expenses.

Penalties for Excess Contributions

Exceeding HSA contribution limits triggers a 6% excise tax on the excess amount, as outlined in IRC Section 4973. This penalty can recur annually if not addressed. Monitoring contributions and setting up alerts can help avoid over-contributions. If an excess occurs, withdrawing the extra amount and any associated earnings before the tax filing deadline can prevent penalties, though withdrawn earnings are subject to income tax.