Health savings account (HSA) limits are going way, way up in 2024.
HSA limits 2024
That’s great news for HSA fans. HSAs are arguably the very best savings and investment vehicle available to individuals and families in the tax code. People who fully utilize their HSAs and contribute the maximum allowable amounts save thousands of dollars each year in taxes.
They also potentially save thousands more by being cash consumers of healthcare, since they can go out of network and choose any doctor they wish.
Also, most healthcare institutions provide discounts to cash buyers that are not available to patients who use health insurance to pay.
2024’s higher limits mean you’ll be able to put more money than ever into these terrific tax advantaged savings vehicles. Read about – IRS Rev. 23-2023.
The higher contribution caps mean that those who qualify to make pretax contributions to HSAs will be able to save even more money on taxes each year. Their HSA balances also allow them to pay their medical expenses with much larger pre-tax dollars – leading to still more savings.
In this blog post, we’ll discuss the upcoming changes, and expand on the advantages and potential drawbacks of HSAs.
Key HSA Limit Increases for 2024
HSA contribution limits increased from 2024 to 2025. For 2025, the HSA contribution limit is $4,300 for an individual, up from $4,150 in 2024. You can contribute up to $8,550 to a family HSA for 2025, up from $8,300 in 2024.
For those with family coverage, the HSA contribution limit is increasing by 7.1% to $8,300, up from the $7,750 limit in 2023.
The higher limit reflects the unusually high inflation rates that prevailed in late 2022 and early 2023.
These higher limits present an excellent opportunity to save more towards potential medical expenses in the future.
Catch-Up Contribution Limits Unchanged
In addition to the higher standard contribution limit, those eligible who are aged 55 and older can contribute an additional $1,000 each year to their health savings accounts.
These “catch-up contributions” remain unchanged in 2024, providing the opportunity for older individuals to significantly bolster their savings in preparation for retirement.
High Deductible Health Plan (HDHP) Requirements for 2024
Not everyone is eligible to contribute to an HSA.
To qualify for HSA contributions, you must be enrolled in a High-Deductible Health Plan (HDHP). These plans typically have lower premiums and higher deductibles compared to traditional health insurance plans.
For 2024, the minimum deductible for an HDHP offering self-only coverage will rise to $1,600, up from $1,500 in 2023. For family coverage, the minimum deductible increases to $3,200 next year, up $200 from the $3,000 minimum deductible in 2023.
Additionally, there are legal limits on the maximum out-of-pocket expenses that can be incurred by an HDHP policyholder. In 2024, these maximums (which include deductibles, co-payments, and other amounts, but exclude premiums) are set at $8,050 for self-only coverage, up from $7,500 in 2023, and $16,100 for family coverage, up from $15,000 in 2023.
Compare Pricing on the Best HSA Plans Available
The Triple Tax Advantage of HSAs
One of the primary reasons why HSAs continue to be an attractive choice for many is the triple tax benefit they offer:
- Pre-tax Contributions: All the contributions made to an HSA are done so with pre-tax dollars, meaning they reduce your taxable income.
- Tax-free Growth: Any interest or other income from the assets in the HSA is tax-free, allowing the account balance to grow unhindered.
- Tax-free Withdrawals: As long as the funds are used for qualified medical expenses, the withdrawals from the account are also tax-free.
This triple tax advantage makes HSAs an incredibly potent tool for healthcare savings and even retirement planning. As of the end of 2022, Americans held a staggering $104 billion in 35.5 million HSAs.
HSAs As a Retirement Asset
Once you reach age 65, you can withdraw funds from your HSA for any purpose without penalty, although non-qualified withdrawals would be subject to income tax.
This flexibility allows you to use your HSA funds strategically to meet both medical and non-medical expenses in retirement.
HSA Portability
Unlike Flexible Spending Arrangements (FSAs), HSAs are portable.
That means they stay with you even if you change jobs or retire.
You, not some third party or even your employer, own the assets in your HSA. Even if your employer made all the contributions to your HSA account.
So there’s no reason not to contribute as much as you can afford to your health savings account, even if your employer set up the HSA.
Employers: Excepted Benefits Health Reimbursement Arrangement (EBHRA) Maximums Increasing
In addition to increasing the allowable HSA limits, The IRS has decided to raise the maximum amount that employers may contribute to an excepted-benefit health reimbursement arrangement (HRA) in 2024 to $2,100—up from the 2023 amount of $1,950.
An Excepted Benefit Health Reimbursement Arrangement (HRA) is a type of health benefit plan that allows employers to provide additional financial assistance to employees for certain medical expenses.
It is considered an “excepted benefit” because it is not subject to certain requirements under the Affordable Care Act (ACA) that apply to other HRAs.
Employers can use an HRA to offer tax-advantaged assistance to employees to pay things like:
- Limited scope vision and/or dental insurance
- Cost sharing expenses, such as deductibles and copays under the employer’s primary group plan
- COBRA insurance premiums
Unlike other types of HRAs, employees don’t need to enroll in the employer’s primary health plan to be eligible for the benefits.
You can set up an HRA to make these benefits available to employees who elect to enroll in a health sharing plan rather than your group health plan, who enroll in an individual or family health insurance plan separate from your or who get their primary medical insurance from their spouse’s employer.
This increase in the annual cap on EBHRA benefits could help employers provide additional support to employees with health-related expenses.
HSA Limits 2024 Conclusions
The increased contribution limits for 2024 represent an opportunity for taxpayers to further maximize their savings and protect even more income from taxation.
Employers, too, can take this opportunity to emphasize the benefits of HSAs and encourage their employees to make the most of these changes.
Whether you’re an employee, independent contractor, or an employer sponsoring or planning to sponsor a group health plan, it’s a good idea to enlist the help of a Personal Benefits Manager with HSA for America.
Your PBM has a wealth of experience and information that can help individuals, families, or employers alike. And it costs nothing extra to get that professional assistance. The insurance companies, not you, pay our fees.
Make a free, no-obligation appointment with your Personal Benefits Manager today.
Here are some additional blogs on HSA: Unlock the Power of Your HSA: Pay for a Chiropractor & Chiropractic Care from your Health Savings Account | Can I Use an HSA to Pay For Counseling or Therapy? | How to Get the Most Out of Your Health Savings Account
Here are some additional pages related to this article: HSA Secure Plan | Healthshare Plans
HSA Limits 2024: Frequentely Asked Questions
What is a Health Savings Account (HSA)?
Health Savings Accounts are a tax-advantaged account created for individuals who are enrolled in high-deductible health plans (HDHPs). The funds contributed to the account aren’t subject to federal income tax at the time of deposit and can be used to pay for eligible medical expenses.
Who is eligible to open an HSA?
To be eligible for an HSA, you must be enrolled in a high-deductible health plan (HDHP), not be covered by another non-HDHP (with some exceptions), not be enrolled in Medicare, and not be claimed as a dependent on someone else’s tax return.
What is a High-Deductible Health Plan?
A High Deductible Health Plan (HDHP) is a type of health insurance plan with lower premiums and higher deductibles compared to traditional health insurance plans. The purpose of an HDHP is to cover serious illness or injury expenses that could otherwise be financially devastating.
As of 2023, the Internal Revenue Service (IRS) defines an HDHP as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. An HDHP’s total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can’t be more than $7,000 for an individual or $14,000 for a family. This limit doesn’t apply to out-of-network services.
One of the benefits of HDHPs is that they can be combined with a Health Savings Account (HSA), allowing individuals to pay for certain medical expenses with pre-tax money.
How much can I contribute to an HSA?
The contribution limits for HSAs in 2023 are $3,650 for individuals and $7,300 for families. But as this blog post describes, you can contribute much more beginning on January 1st, 2024, for the new tax year.
If you are 55 or older, you can contribute an additional $1,000 as a catch-up contribution.
Can my employer contribute to my HSA?
Yes, employers can contribute to their employees’ HSAs. However, the combined total of employer and employee contributions must not exceed the annual maximum contribution limit.
Are HSA contributions tax-deductible?
Yes, contributions made to an HSA are tax-deductible. Also, any interest or other earnings on the assets in the account are tax-free.
Can I use my HSA to pay for non-medical expenses?
Yes, but if you’re under age 65, non-medical withdrawals will be taxed at your income tax rate plus a 20% penalty. After age 65, non-medical withdrawals are taxed as income but don’t face the additional 20% penalty.
What happens to my HSA when I turn 65?
Once you turn 65 and enroll in Medicare, you can no longer contribute to your HSA. However, you can still use the funds for out-of-pocket medical expenses, including Medicare premiums.
Do my HSA funds roll over year to year?
Yes, unlike Flexible Spending Accounts (FSAs), HSAs have no “use it or lose it” policy. Funds in an HSA roll over from year to year, so you can save them for future medical expenses.
Can I invest my HSA funds?
Yes, many HSA providers offer investment options. Like a retirement account, these investments can grow tax-free as long as they remain in the HSA.
What qualifies as a high-deductible health plan (HDHP)?
For 2023, the IRS defines an HDHP as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family.
What are qualified medical expenses?
Qualified medical expenses include most medical care and services, dental and vision care, prescriptions, and over-the-counter drugs prescribed by a doctor.
Can I use my HSA to pay health insurance premiums?
Generally, HSA funds cannot be used to pay health insurance premiums. However, there are exceptions for certain types of insurance such as long-term care insurance, health coverage while receiving unemployment benefits, or health insurance after age 65 (other than a Medicare supplement policy).
What happens to my HSA if I change jobs?
HSAs are portable, so if you change jobs, your HSA moves with you and the funds remain available for qualified medical expenses.
If I have an HSA, can I also have a Flexible Spending Account (FSA)?
You can have a limited-purpose FSA (for vision, dental, or preventive care) or a post-deductible FSA (which can be used for all medical expenses but only after the HDHP deductible is met) alongside an HSA.
What happens to my HSA when I die?
If you designate your spouse as the beneficiary, your HSA will be treated as your spouse’s HSA after your death. If you designate someone other than your spouse, the account stops being an HSA and the fair market value of the account becomes taxable to the beneficiary.
Hi! I’m Misty Berryman, and I’m one of your Personal Benefits Managers. I like working with HSA for America because we’re creating solutions to healthcare problems. Our focus on money-saving alternatives like HSA plans and health sharing programs, and the variety of health share programs we offer, are what set us apart. Read more about me on my Bio page.
