HSA Contribution Limits

HSAs can be an excellent way to save for future healthcare expenses. But it would help if you were wary of exceeding the annual limit when contributing.

Each year, the IRS publishes HSA contribution limits. You can find them in IRS Publication 969.

Self-only

If you have an HSA-eligible high deductible health plan (HDHP) that is self-only, you are eligible to contribute up to the annual contribution limit for HSAs. In 2024, this limit was $3,650 for self-only HDHPs and $7,300 for family HDHPs.

An HSA is a tax-exempt savings account for health care expenses. It can cover many eligible healthcare costs, such as over-the-counter medications without a prescription and COVID-19 personal protective equipment (PPE).

On March 1, 2023, HSAs can also pay for menstrual care items like pads and tampons. This provides women with the opportunity to save on these often expensive supplies.

Additionally, the CARES Act grants HDHPs exclusive coverage of telemedicine services until year-end 2024, provided participants stay within their deductible amount. Unfortunately, this change is temporary and will expire on December 31, 2024, unless Congress extends or makes it permanent.

The CARES Act was passed to relieve doctors’ offices of some of their resource constraints. It allows HDHPs to cover telemedicine before participants have reached their deductible, which benefits patients and healthcare providers alike.

It also provides a safe harbor for HDHPs who cover telemedicine, which can cut administrative costs and lower patients’ out-of-pocket medical expenses. Furthermore, the legislation includes a provision that permits HDHPs to pay for over-the-counter drugs and supplements without a prescription – another positive step toward helping consumers better manage their healthcare.

Due to rising inflation, the IRS is raising the maximum HSA contribution limits for both self-only individuals and families in 2024. From 2023, these limits will increase from $3,850 for self-only HDHPs and $7,750 for family HDHPs by $200 and $450 respectively; respectively.

Family

Health Savings Accounts (HSAs) allow people with high-deductible health plans to save money and pay for out-of-pocket healthcare costs on a tax-favored basis. These funds can be used for covering medical expenses or growing into an impressive balance that can be put towards future qualified medical expenses like retirement.

HSAs are a popular option for families with high-deductible health insurance plans. They provide advantages that other tax-advantaged accounts don’t, such as triple tax advantages on contributions, investment growth, and withdrawals.

One of the most significant advantages is that, unlike other tax-advantaged accounts, you can withdraw funds for qualified medical expenses even decades after they occur without a penalty. This flexibility is essential for retirees who often need to cover substantial out-of-pocket healthcare costs.

Another key advantage is that HSA savings are usually FDIC-insured, meaning they’re safeguarded against bank failures. This means even if your HSA account isn’t earning much interest, it could remain safe from financial disasters.

However, you must ensure that any investment gains within the account are also used for qualifying medical expenses. For instance, investing HSA money into stocks or other investments that need to meet those criteria isn’t allowed.

Though HSA contribution limits are lower than other tax-advantaged retirement accounts, HSAs can still be an excellent savings vehicle for qualified medical expenses. To maximize its benefit, set aside as much money as possible each year and reserve any remaining funds for later withdrawals.

If you have a family with one spouse in one health plan and the other in another, opening two separate HSA accounts may be beneficial to maximize your potential savings. This is especially true if your spouse has employer-sponsored HSAs.

The IRS recently announced an increase in HSA contribution limits for 2024. Individuals will see their maximum annual limit increase to $3,850, while families will remain at $7,750 – a $200 increase over last year’s figure. Furthermore, those 55 or older can contribute an additional $1,000 each year as a catch-up contribution.

Catch-up

If you are 55 or older, you may be eligible to make an extra “catch-up” contribution each year above the annual HSA contribution limit of $1,000. This extra money can help cover medical expenses and save for retirement in the long run.

The IRS sets HSA contribution limits that differ for individuals and families. However, the catch-up contribution is only available to those age 55 or older with an HSA in their name.

In marriages where one spouse already contributes to the family HSA contribution limit in their name, the other must create a separate HSA and make the additional $1,000 catch-up contribution. Alternatively, these catch-up contribution rules apply if both spouses have family coverage through high-deductible health plans.

Before contributing, it’s essential to know the catch-up contribution rules applicable to individuals and families. If you need clarification on whether you qualify for an HSA or how much money can be contributed, connect with a Trusted Pro today for guidance.

To be eligible for an HSA, you must be enrolled in a high-deductible health plan (HDHP) and possess a qualified high-deductible health insurance policy with at least $1,500 of self-only coverage or $3,000 for family coverage.

For 2022, the HSA contribution limit will increase to $3,650 for self-only coverage and $7,300 for family coverage – an increase of $50 and $100 from 2023, respectively.

The catch-up contribution limit for HSA-eligible individuals is $1,000 annually, prorated according to how many months you are eligible in a given year. So if you’re suitable for seven months in 2024 and contribute up to $2,129 ($3,650 x 12) during that time.

Reminder: if you are over 65 and have Medicare or a qualified IRA, any contributions must be withdrawn before turning 65 to avoid taxation and a 20% penalty. Likewise, if you are under 65 and have both Medicare and a qualified IRA, wait until your first month of enrollment in Medicare before contributing to an HSA.

Taxes

Contributing to an HSA each year has certain limits that help you save taxes while having money available for expected and unexpected health care costs. These guidelines ensure you stay within your budget, helping you cover expected and unexpected medical expenses.

Each year, these limits are adjusted for inflation. In 2024, individuals with self-only coverage can contribute a maximum of $3,650 – an increase of $100 from last year’s limit of $3,650; those with family coverage can contribute $7,300, up from $7,200 the prior year.

High-deductible health plans (HDHPs) require a minimum annual deductible of $1,500 for individuals and $3,000 for families. Furthermore, the IRS requires your project to have an out-of-pocket maximum that must be spent each year.

If you don’t meet the required qualifications for an HSA, your contributions will be taxed at a higher rate than they would be without limits. That is because the IRS charges an excise tax on gifts if they exceed what is allowed under the law.

Calculating the excise tax requires adding the excess contribution to your gross income and subtracting it from your adjusted gross income (AGI). You can find this amount on Form 5329, Additional Taxes on Qualified Plans (Including IRAs and Other Tax-Favored Accounts).

One way to avoid the 6% excise tax is by withdrawing any contributions you made more than your HSA contribution limit, including any earnings associated with those excess contributions. You may do this before the due date for filing your federal tax return or by extending it until after that deadline.

One way to avoid paying taxes on HSA contributions is by rolling over money from another type of tax-favored saving account into your HSA – this is known as a “rollover contribution.”

The IRS allows eligible individuals to make one-time contributions to an HSA out of amounts distributed from an IRA or Roth IRA. While these distributions aren’t tax deductible, they are excluded from the owner’s income to the extent they would otherwise be included.

Contributions to a Health Savings Account have its limits. The maximum contribution for an HSA for the 2024 calendar year has been announced by the Internal Revenue Service in May 2023.

The maximum contribution an individual can make to a Health Savings Account is $3,600 for self-only coverage and $7,200 for family coverage. When compared to the last previous year’s contribution limits, this is a $50 increase for self-only and $100 for family coverage.

Year	Self-Only Maximum Contribution	Family Maximum Contribution
2024	$3,600	$7,200

This increase in the HSA contribution limits have a direct impact on the out-of-pocket amounts but doesn’t have it on the deductibles. Same as 2023, the HDHP minimum deductible is $1,400 for self-only and $2,800 for family.

HSA Contributions Deduction

The contributions to a Health Savings Account is deductible. Regardless of how much you contribute, you can claim a full deduction. If you max out your HSA contributions, it can add up to a significant deduction amount.

The best part about this deduction is that you aren’t even required to itemize deductions. It can be claimed with the standard deduction. This can definitely help you to reduce taxable income while enjoying the benefits of HSA.