Health Savings Accounts [HSAs] are one of the only ways to achieve a triple tax advantage while ensuring your medical needs are covered. For this reason, it makes sense to contribute as much as you can in each eligible year.
These accounts are such an attractive saving option that the IRS imposes limits on the amount you can contribute each year. Fortunately, these limits are updated annually to account for rising costs. After the most recent update, the amount you can add to your HSA will increase in 2025 – giving you even more of an opportunity to lower your taxes and save for healthcare costs.
HSA Contribution Limits Will Rise in 2025
Inflation has cooled somewhat from the highs in recent years, but overall costs are still rising. The IRS has taken these price increases into account and raised the HSA contribution limits for both individuals and families.1
Individual HSA Contribution Limits In 2025
For individuals with high-deductible health plans, the HSA contribution limit will increase by $150 to $4,300. While seemingly modest, the annual increase is intended to help individuals meet the rising costs of health care.
Family HSA Contribution Limits in 2025
Those with family health insurance plans will also be able to add more to their HSAs in 2025. The contribution limit for this type of plan will increase by $250 to $8,550.
HSA Catch-Up Contribution Limits in 2025
To help individuals cover higher medical costs as they age, the IRS allows an additional catch-up contribution for people aged 55 and older. This limit will remain at $1,000 per year in 2025.
See the table below for an overview of the changes to HSA contribution limits for 2025.
Past HSA Contribution Limits
Over the past decade, the IRS has raised HSA limits nine times. These increases have totaled about 28%, bringing the individual limit from $3,350 in 2015 to $4,300 in 2025.
As the chart below shows, the annual increases were particularly large in 2023 and 2024 when the inflation rate was well above average. The 2025 increase is lower than the past two years, but still above the average annual increase over the past decade.
Who Can Contribute to an HSA?
The tax benefits of an HSA are certainly attractive – including a deduction for your contribution, tax-deferred growth, and tax-free withdrawals for qualified medical expenses. However, only certain people are eligible to contribute to this type of account.
You Must Have a HDHP To Contribute to an HSA
To be eligible for an HSA, you must have a high deductible health plan [HDHP]. The IRS defines this type of plan as having an annual deductible that is not less than $1,650 for an individual or $3,300 for a family. The plan must also cap annual out-of-pocket expenses – which include deductibles, co-payments, and other amounts except premiums – at no more than $8,300 for an individual or $16,600 for a family.
To determine if your health insurance plan meets these criteria, contact the Human Resources department at your company or the insurance company who sold you the health care plan. You can also review your plan with an experienced financial advisor to better understand your coverage.
HSA Contributions Are Prorated If You Had A HDHP For a Partial Year
You can contribute to an HSA if you had a HDHP at any point during the year. However, to contribute the maximum, you must have maintained this type of plan all 12 months of the year. If you only had a HDHP for part of the year, your maximum contribution is prorated based on the number of months you had the plan.
Your HDHP Must Be Your Only Type of Health Insurance to Contribute to an HSA
You cannot have any type of health insurance other than an HDHP and contribute to an HSA. This rule does not apply to special types of insurance – like vision and dental coverage. However, it does apply to Medicare coverage.
This means you cannot contribute to an HSA if you are enrolled in Medicare. In fact, due to back-dating for Medicare benefits, you need to stop HSA contributions before the month of your 65th birthday or 6 months before enrolling in Medicare if you are enrolling after age 65. Read our article How Medicare Impacts HSA Contributions for more detailed information about this topic.
While you can’t contribute to an HSA once you enroll in Medicare, you can use your HSA to pay for some Medicare expenses. These include Part A and Part B premiums as well as Medicare Advantage premiums. Keep in mind, however, that Medigap premiums do not qualify for tax-free withdrawals.
Due to the significant tax benefits and ability to use HSA funds for some Medicare costs, an HSA can be an important part of your retirement plan. An experienced financial advisor can help you determine how much to contribute to this type of plan and how it fits into your overall financial picture.
Get Answers to Your HSA Questions with Meld Financial
At Meld Financial, we have the answers to your most pressing HSA questions, including how this type of account fits into your wholistic financial plan. To make this determination, our team will develop your Financial Fingerprint®, a comprehensive wealth management plan.
Your Financial Fingerprint® brings together the most important pieces of your financial picture into one easy to understand plan including health care costs, retirement savings, and government benefits. It only takes a single meeting that lasts about an hour to get started – so there’s no reason to delay!
Contact a member of our team today to get your Financial Fingerprint®.
Sources:
1Internal Revenue Service. (2024, May 9). Revenue Procedure 2024-25.