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Tax-saving HSA contribution limits go up in 2025

A health savings account, or HSA, helps high deductible health plan, or HDHP, enrollees cover their larger out-of-pocket medical costs. The plan limits and HSA contribution amounts are adjusted annually for inflation. Here are the 2025 numbers.

Hosptial emergency room ER_Kay Bell
Photo by Kay Bell

The cost of health care keeps rising. That’s why many individuals and families who are basically healthy, but want medical coverage in case of an emergencies, often turn to high deductible health plans, or HDHPs.

HDHP policies’ associated health savings accounts, or HSAs, help offset the plans larger out-of-pocket costs. HSAs also offer triple tax savings.

If you’re interested in such coverage, you want to make sure it meets Internal Revenue Service guidelines.

The deductible amount that qualifies for HDHP treatment, as well as how much you can put into an HSA, are adjusted annually for inflation. The IRS today issued Revenue Procedure 24-25 with those amounts for the 2025 tax year.

HDHP, HSA costs and savings: First, though, a quick review of these health care plans.

HDHPs require enrollees to pay more out-of-pocket costs. The most notable expense, as the name indicates, is the large deductible amount that must be met before policy coverage starts paying.

However, HDHPs typically have lower monthly premiums than the traditional type of medical insurance. So, many individuals, especially those with few medical worries, accept the risk of a higher deductible in exchange for the immediate cash-flow benefit of lower premiums.

They also can take advantage of the HDHP’s companion HSA. The money stashed in the tax-favored account is used to pay the higher deductible costs.

2025 high deductible limits: Now to the numbers.

In 2025, a medical insurance policy qualifies as a high-deductible plan if it has a minimum annual deductible of $1,650 for individual coverage. That's up a tad from $1,600 for 2024.

For family coverage, an HDHP has a deductible of $3,300 for family coverage, up from this year's $3,200 family deductible.

There also are annual inflation-adjusted limits on the maximum amount of out-of-pocket expenses associated with an HDHP. This includes deductibles, co-payments, and other amounts, but not the premiums you pay for the plan itself.

For 2025, these expenses cannot exceed $8,300 for self-only coverage, an increase from 2024's $8,050 limit. The limit for family plans is $16,600. That's a bump from the 2024 limit of $16,100 for family coverage.

The following table shows the just-released HDHP amounts for 2025 and what's in place for the 2024 tax year.

High Deductible Health Plan types

2025 Limits

2024 Limits

Maximum health plan deductible,
single coverage

$1,650

$1,600

Maximum health plan deductible,
family coverage

$3,300

$3,200

Maximum out-of-pocket expenditures,
single coverage

$8,300

$8,050

Maximum out-of-pocket expenditures,
family coverage

$16,600

$16,100


Essentially, a plan's deductible amount must be at least the amounts shown in the table.

HSA adjustments, too: Similar inflation changes are also ahead for the HSA that helps cover expenses that fall into the associated policy's high deductible.

For 2025, you can contribute up to $4,300 to an HSA if you have individual HDHP coverage. That's up from this year's $4,150 maximum HSA contribution.

Family HDHP coverage in 2025 will let you put up to $8,550 into the associated HSA. That is an increase from the current $8,300 family coverage HSA maximum.

Policy holders who are 55 or older by Dec. 31 can sock away an additional $1,000 for the tax year. Note that like other tax code catch-up provisions, the HSA additional contribution for older account owners is a flat one grand. It is not adjusted annually for inflation.

If you're married, have family HDHP coverage, and your spouse also will be 55 by the end of the year, he or she also can take advantage of the added $1,000 catch-up amount for his or her own separate HSA.

HRAs also get 2025 inflation bump.

Today's IRS announcement also notes an increase in 2025 for an excepted benefit HRA, the acronym for a health reimbursement arrangement.

The maximum HRA amount for 2025 is $2,150. That’s a slight increase from the 2024 HRA amount of $2,100.

HRAs are employer-funded medical plans whose funds are used to pay back, or reimburse, employees for qualified medical expenses. This includes vision, dental, prescription, and other types of benefits separate from their main company-provided health insurance plan.

The money that goes into an HRA is pre-tax, meaning the workers don't face any tax consequences on approved reimbursements. The business also is allowed to claim a tax deduction for these reimbursements.

However, unlike an HSA, an HRA is not portable. Workers cannot take HRA funds with them when they leave the job that offers the medical savings option.

 

Triple tax benefits for an HSA: Most of us tend to think short term when it comes to financial decisions. That's understandable, especially at times like these where money is tight for many of us.

That's why some HDHP enrollees ignore the benefit of opening an HSA.

Sure, that will give you more immediately available cash. But if you have a high deductible and a medical emergency pops up, which, let be honest, seems to also happen at the worst possible time, you'll be stuck covering all the deductible costs.

But if you have an HSA, not only will it help pay those unexpected medical expenses.

Plus, an HSA also has three nice tax advantages.

First, the money you put into the medical account is tax free. Your contributions usually are made through salary deferral at your workplace, meaning the HSA amount is taken out of your paycheck before taxes are calculated. Plus, any employer contributions aren't included in your taxable income.

If you make HSA contributions directly, you deduct the amount you contribute when you file your taxes. This is what's known as an above-the-line deduction, meaning you don't have to itemize to make the medical claim. It’s claimed on line 13 of Form 1040 Schedule 1.

Second, the earnings on the money you contribute to your HSA grows tax-free. That's tax-free, not tax-deferred. No tax due on it ever.

Third, when you use the HSA money to pay allowable out-of-pocket medical expenses, those withdrawals also are tax-free. This includes using HSA money for not just the usual, and many, IRS-approved medical costs we all tend to run up each year, but also to pay for treatments of chronic medical conditions.

OK, we are talking taxes, so there's a caveat.

Be careful when taking HSA distributions. Make sure to use the funds for allowable medical costs. If you're younger than 65 and spend HSA money on something that's not IRS approved, you'll owe a 20 percent penalty on that withdrawal.

Added HSA advantages: OK, those are the big three immediate tax savings from an HSA, but wait, there's more.

An HSA's year-end balance can be carried over from year to year. There's no use-it-or-lose-it threat as with a workplace flexible spending account, or FSA.

Your HSA is portable. It's not tied to your job, so if you change employers, you can take your HSA with you when you go to your new workplace.

Finally, if you have money in your HSA after you turn 65, you can use the funds without tax penalty for any reason. This 65+ withdrawal option means many folks essentially treat a well-funded HSA as another, de facto retirement account. And it's a nest egg without any government required minimum distributions (RMDs) to worry about when you celebrate your 73rd birthday.

Of course, any medical coverage decision is based on many things, not just the tax implications.

But if tax savings are a component, do take them into account, along with all your (and covered family) health care and financial factors, so that you can find a policy that fits both your medical and fiscal needs.

That thorough evaluation might just show that an HDHP and HSA is the best health care coverage Rx.

You also might find these items of interest:

 

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