What Is the Maximum Contribution to an HSA?
Master the rules for HSA contributions to optimize your tax-advantaged healthcare savings. Understand how to maximize benefits and avoid common pitfalls.
Health Savings Accounts (HSAs) offer a tax-advantaged way to save and pay for qualified medical expenses. These accounts are exclusively available to individuals covered by a High Deductible Health Plan (HDHP). HSAs provide a triple tax benefit: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free. Understanding the rules governing these accounts, particularly the annual contribution limits, is important for maximizing their benefits.
Understanding HSA Contribution Limits
The Internal Revenue Service (IRS) establishes the maximum amount individuals can contribute to an HSA each year. These limits are subject to annual adjustments. For 2025, the maximum HSA contribution is $4,300 for individuals with self-only HDHP coverage. Those with family HDHP coverage can contribute up to $8,550 for the year.
An additional “catch-up” contribution is permitted for individuals aged 55 and older. This allows an extra $1,000 to be contributed to the HSA annually, beyond the standard limits. This catch-up contribution remains constant.
Qualifying for HSA Contributions
To be eligible to contribute to an HSA, an individual must be covered by a High Deductible Health Plan (HDHP). For 2025, an HDHP is defined by specific financial thresholds: it must have an annual deductible of at least $1,650 for self-only coverage or $3,300 for family coverage. Furthermore, the plan’s out-of-pocket maximum, which includes deductibles, co-payments, and co-insurance, cannot exceed $8,300 for self-only coverage or $16,600 for family coverage.
Beyond HDHP enrollment, other criteria determine eligibility for HSA contributions. An individual cannot be covered by any other non-HDHP health insurance. Additionally, individuals enrolled in Medicare are not eligible to contribute to an HSA, nor are those who can be claimed as a dependent on someone else’s tax return.
Calculating Your Allowable Contribution
Determining your HSA contribution involves considering IRS limits and your eligibility status. Any contributions made by an employer to an employee’s HSA count towards the annual maximum contribution limit for that individual. For example, if the family coverage limit is $8,550 and an employer contributes $1,000, the individual can only contribute an additional $7,550.
For individuals who become HDHP-eligible mid-year, the “last-month rule” may apply, allowing them to contribute the full annual amount if they are covered by an HDHP on the first day of the last month of their tax year, typically December 1. This rule, however, comes with a “testing period” requirement. The individual must remain an eligible HDHP participant for the entire following calendar year. Failing this testing period requires the inclusion of the excess contributions from the previous year, plus a 10% penalty, in the current year’s gross income.
If an individual is eligible for only a portion of the year and the last-month rule does not apply, their contribution limit is prorated based on the number of months they were HDHP-eligible. Eligibility is determined on the first day of each month. For instance, if an individual had self-only HDHP coverage for seven months of the year, their maximum contribution would be seven-twelfths of the annual self-only limit.
Making Contributions and Handling Excesses
Contributions to an HSA can be made in several ways. Many individuals contribute through pre-tax payroll deductions offered by their employer, which reduces their taxable income immediately. Alternatively, direct contributions can be made to an HSA custodian, and these amounts are tax-deductible when filing income taxes. Funds can also be rolled over from another HSA or from an Individual Retirement Account (IRA) into an HSA.
Exceeding the maximum allowable contribution for a given year carries consequences. Any amount contributed in excess of the limit is subject to a 6% excise tax for each year it remains in the account. To avoid this penalty, excess contributions, along with any earnings attributable to them, must be removed from the HSA. This correction must occur before the tax filing deadline for the year the excess contribution was made. Specific instructions for calculating and reporting excess contributions and their removal are provided by the IRS.