In 2025, the IRS has announced an increase in the health savings account (HSA) contribution limit. The new limits are $4,300 for self-only coverage and $8,550 for family plans. To qualify for contributions, individuals must have an eligible high-deductible health insurance plan. There are three tax breaks associated with HSAs: an upfront deduction for contributions, tax-free growth on investments, and no taxes on withdrawals for qualified medical expenses.
HSAs offer significant benefits for those who contribute to them as they are triple-tax advantageous for medical expenses. The 2025 contribution limit for self-only health coverage has increased from $4,150 in 2024 to $4,300. For individuals with family coverage, the limit has also increased to $8,550 from $8,300 in 2024. The 2025 catch-up contribution for savers age 55 and older will be released later this year.
To be eligible to make HSA contributions, individuals must have a high-deductible health insurance plan with a minimum deductible of $1,650 for self-only plans or $3,300 for family coverage in 2025. However, only 19% of participants invest their balance while the majority leave their savings in cash according to a survey from the Plan Sponsor Council of America. It is important to take advantage of the tax breaks and potential growth opportunities offered by HSAs.
The IRS’s announcement of an increase in the HSA contribution limit is good news for those who want to save money on healthcare costs. With a higher contribution limit comes more opportunities to save money on healthcare expenses and potentially grow their savings over time. However, it’s important to note that only eligible high-deductible health insurance plans can be used to contribute to an HSA.
To maximize the benefits of HSAs, it’s important to understand how they work and what types of investments are available within them. It’s also important to take advantage of all three tax breaks associated with HSAs: an upfront deduction for contributions, tax-free growth on investments
