The contribution limits for various tax-advantaged accounts for the following year are usually announced in October, except for the HSA, which comes out in April or May. The contribution limits are adjusted for inflation each year, subject to rounding rules.
You can only contribute to an HSA if you’re covered by a High Deductible Health Plan (HDHP) with no other coverage. You can use the money already in the HSA for qualified medical expenses regardless of what insurance you currently have.
HSA Contribution Limits
| 2024 | 2025 | |
|---|---|---|
| Individual Coverage | $4,150 | $4,300 |
| Family Coverage | $8,300 | $8,550 |
Source: IRS Rev. Proc. 2023-23, Rev. Proc. 2024-25.
Employer contributions are included in these limits.
The family coverage numbers happened to be double the individual coverage numbers in 2024 but it isn’t always the case every year. Because the individual coverage limit and the family coverage limit are both rounded to the nearest $50, the family coverage limit can be slightly more or slightly less than double the individual coverage limit when one number rounds up and the other number rounds down.
Age 55 Catch-Up Contribution
As in 401k and IRA contributions, you are allowed to contribute extra if you are above a certain age. If you are age 55 or older by the end of the year (not age 50 as in 401k and IRA contributions), you can contribute an additional $1,000 to your HSA. If you are married, and both of you are age 55, each of you can contribute an additional $1,000 to your respective HSA.
However, because an HSA is in one individual’s name, just like an IRA — there is no joint HSA even when you have family coverage — only the person age 55 or older can contribute the additional $1,000 in his or her own name. If only the husband is 55 or older and the wife contributes the full family contribution limit to the HSA in her name, the husband has to open a separate account in his name for the additional $1,000. If both husband and wife are age 55 or older, they must have two HSA accounts in separate names if they want to contribute the maximum. There’s no way to hit the combined maximum with only one account.
The $1,000 additional contribution limit is fixed by law. It’s not adjusted for inflation.
Two Plans Or Mid-Year Changes
The limits are more complicated if you are married and the two of you are on different health plans. It’s also more complicated when your health insurance changes mid-year. The insurance change could be due to a job change, marriage or divorce, enrolling in Medicare, the birth of a child, and so on.
For those situations, please read HSA Contribution Limit For Two Plans Or Mid-Year Changes.
HDHP Qualification
The IRS also defines what qualifies as an HDHP. For 2024, an HDHP with individual coverage must have at least $1,600 in annual in-network deductible and no more than $8,050 in annual out-of-pocket expenses. For family coverage, the numbers are a minimum of $3,200 in annual deductible and no more than $16,100 in annual out-of-pocket expenses.
For 2025, an HDHP with individual coverage must have at least $1,650 in annual deductible and no more than $8,300 in annual out-of-pocket expenses. For family coverage, the numbers are a minimum of $3,300 in annual deductible and no more than $16,600 in annual out-of-pocket expenses.
Please note the deductible number is a minimum while the out-of-pocket number is a maximum. The maximum out-of-pocket limit only applies to the in-network number. If the in-network out-of-pocket limit of your insurance policy is too high, it doesn’t qualify as an HSA-eligible policy.
In addition, just having the minimum deductible and the maximum out-of-pocket isn’t sufficient to make a plan qualify as HSA eligible. The plan must also meet other criteria. See Not All High Deductible Plans Are HSA Eligible.
| 2024 | 2025 | |
|---|---|---|
| Individual Coverage | ||
| minimum deductible | $1,600 | $1,650 |
| maximum out-of-pocket | $8,050 | $8,300 |
| Family Coverage | ||
| minimum deductible | $3,200 | $3,300 |
| maximum out-of-pocket | $16,100 | $16,600 |
Source: IRS Rev. Proc. 2023-23, Rev. Proc. 2024-25.
Contribute From Payroll
If you have a High Deductible Health Plan (HDHP) through your employer, your employer may already set up a linked HSA for you at a selected provider. Your employer may be contributing an amount on your behalf there. You save Social Security and Medicare taxes when you contribute to the HSA through payroll. Your employer may be paying the fees for you on that HSA.
When you contribute to an HSA outside an employer, you claim the tax deduction on your tax return similar to when you contribute to a Traditional IRA. If you use tax software, be sure to answer the questions on HSA contributions. The tax deduction shows up on Form 8889 line 13 and Schedule 1 line 13.
Non-Dependent Adult Children
If your HDHP also covers an adult child who’s not claimed as a dependent on your tax return, each non-dependent adult child covered by the plan can also contribute to a separate HSA in their name at the family coverage level when they don’t have other non-HDHP coverage. This is because they meet the eligibility:
(a) Covered by an HDHP with no other coverage; and
(b) The HDHP policy they have covers more than one person.
Each non-dependent adult child can open a separate HSA on their own with an HSA provider.
Best HSA Providers
If you get the HSA-eligible high deductible plan through an employer, your employer usually has a designated HSA provider for contributing via payroll deduction. It’s best to use that one because your contributions via payroll deduction are usually exempt from Social Security and Medicare taxes. If you want better investment options, you can transfer or roll over the HSA money from your employer’s designated provider to a provider of your choice afterward. See How To Rollover an HSA On Your Own and Avoid Trustee Transfer Fee.
If you are not going through an employer, or if you’d like to contribute on your own, you can also open an HSA with a provider of your choice. For the best HSA providers with low fees and good investment options, see Best HSA Provider for Investing HSA Money.
Say No To Management Fees
If you are paying an advisor a percentage of your assets, you are paying 5-10x too much. Learn how to find an independent advisor, pay for advice, and only the advice.
JoeTaxpayer says
No surprise, not even a 2% increase. The strangest thing with these numbers is that family is just shy of 2X the individual limit. In my opinion, it should be 2X for couples, and 2.5X minimum if there are children. A family with 2-3 kids is always running to the doctor, and those deductibles add up fast.
Harry Sit says
As you know Congress set these limits in the law. The IRS is just doing the simple math to adjust them for inflation. The contribution limit for family coverage was neatly 2x the limit for individual coverage when it started. After rounding the inflation adjusted numbers to the nearest $50, we get into this strange situation of being $50 shy of the 2x number.
The White Coat Investor says
Who cares about the number of kids or how often they go to the doctor? Those who are maximizing these accounts probably aren’t using them for health care. It’s just a stealth IRA. Why spend HSA dollars while investing in a taxable account?
Campensium says
To white-coat inv:
Most of us in high deductible plans can’t use the HSA as a IRA. When your insurance out of pocket goes from 1250 to 5000 because your plan was changed by your employer to a high deductible plan but your salary was not increased by the same amount, you suddenly have in practice a salary decrease 3750. Don’t forget that such high deductible plans often don’t cover dentist and eye-doctors so you have a lot of other “medical” expenses that don’t even count towards the out of pocket costs. For the average middle class person HSA’s are not a bargain! Also in California HSA are taxed as ordinary income.
Ed says
OOPS! You did not mention the $1000 additional catch-up contribution for those aged 55+ (or if you did, I could not find it). For example, family limits for 2015 for age 55+ would be $7650 instead of $6650.
Harry Sit says
Point taken. Thank you. Will add to the article shortly.
Madrona says
So, I am confused by this. Do employer contributions to your HSA also have to fall under the maximum? So, if I contribute $6550 to my HSA, can my employer contribute an additional $2,000 making it a total of $8550? Or does that mean I need to pull out $2,000 so my maximum stays at $6550?
Harry Sit says
It’s an overall limit, regardless who contributes.
SmartMoneyMD says
It seems to me that using an HSA as a investment vehicle really requires several years of employment before you can truly accrue enough to invest without penalty. For instance, I’m only on my second year of an HSA. I currently have everything in my employer’s servicer, Wells Fargo doing nothing. In order for me to put my money into HSA Bank, I really need a certain base amount (like $5k) in the savings account before I can put the rest in the investment account portion.
Harry Sit says
There are places like Saturna Brokerage where you can invest every dollar. You just pay $15 and buy one ETF.
Josh says
You don’t need 5k base at HSA bank… you can invest it all, you’ll just pay $5.50 a month in fees…
Even if you only have 2k to invest you only need to have a return of more than 3.3% to come out better by investing. I used to keep the 5k in to not have a fee and made about $10 of interest…. To break even with investing and having the $5.50 fee and not receiving the $10 of interest I need to make $76 off the 5k a year. That comes out to a little over 1.5%, I’ll take my chances that I can do better than 1.5 % (did 18% last year alone w/ HSA account and a few commission free ETFS through the TD Ameritrade investment option). Just make sure you keep enough in the account to pay the fees each month.
Mari says
If the IRS hasn’t yet released the 2016 numbers, what is your source for this information?
Harry Sit says
It’s noted at the end of the article.
Harry Sit says
The IRS made the official release today. It confirmed all my numbers.
Frank Kirstein says
Can you fund a HSA from an annuity on a pretax basis?
Kirs says
I am already at my 2015 limit in hsa contributions, can I put money in now toward my 2016 tax year?
Harry Sit says
No.
Robert says
I am an employee, and my wife is self-employed. I carry the health insurance for both of us. I am able to contribute the $1,000 catch-up for myself. The benefits rep for my company said only one catch-up contribution is allowed per account–not per person. That I am the only one who can make a catch-up contribution. That doesn’t sound right. I think my wife should be able to contribute $1,000 to her own HSA by virtue of being covered by a qualified plan through my employer. Right?
Two separate accounts means more maintenance fees though. My employer pays the fees on our (my) HSA now but won’t cover any fees for her.
Harry Sit says
Both you and the rep are correct. One catch-up per account, because the account only has your name on it. Even though you make the family-level contribution, it’s still just your account. You are the only one who can contribute to that account. There is no joint HSA. If she wants to contribute catch-up she has to put it into a separate account in her name, just like if she wants to contribute to an IRA, it has to go into an account in her name.
She can open her HSA on her own anywhere. It doesn’t have to be the same place your employer chose. Lake Michigan Credit Union, which anyone can join by paying one-time $5, offers a free account that pays 1.5% interest with no minimal balance (2% when balance goes above $5,000).
https://lmcu.org/banking/savings/savings_hsa.aspx
Jay Harter says
Both my wife and I can contribute to an HSA through our work plans. I have my 2 children under my insurance – and can max out at $6,750. She has the option of maxing out at $3,350. However, I’m assuming we cannot do that. I just want to confirm that even though our respective companies would allow us both to individually contribute $10,100 combined – the IRS wouldn’t allow this (or would penalize us later). Is that correct? That we would have to reduce our amounts so the max we contribute is the family limit of $6,750?
Harry Sit says
That’s correct. You must share the family coverage limit. If either or both your employers contribute to your HSAs, it counts toward to maximum as well.
Lee says
If you have an HSA account but have not contributed in the past year, and would like to this year, if funded how will this be pre-taxed dollars?
Britt C says
You will receive a form from the custodian of the bank and will report it on your tax return on line 25 on form 1040 (unless changed in future years) Health Savings account deduction…. you’ll fill out Form 8889 and indicate that you made your contribution with after-tax dollars (rather than through payroll). Your Adjusted Gross Income will be reduced then by this amount.
Make sure you don’t contribute over the limit if your employer contributed any as the annual limit is combined for both your contributions and your employers.
Bob G says
Multi-part questions. I’m in the transition window to Medicare and have no idea if/how I can take advantage of an HSA.
1. I turn 65 in June 2016 – can I sign up (with my wife) for an HSA plan, make the maximum contribution between Jan-May, and then go to Medicare? Is there any proration? My wife will continue with the HSA.
2. The HSA I’m looking at is offered through the Government exchange. I have only retirement and investment income. So I think they qualify as after-tax contributions that will reduce my AGI?
a). Is the AGI reduction counted for 2016 or does it apply to 2017? (I thought I read somewhere that the contribution is reduced from your NEXT years income?)
b). Also, do you know if it reduces your MAGI for the ACA credits?
3. My wife turns 65 in March 2017 – I assume the answer to the above questions would also apply to her in 2017?
Thanks,
Bob G.
Harry Sit says
See HSA Contribution Limit For Two Plans Or Mid-Year Changes. It’s an above-the-line deduction similar to a deductible IRA contribution.
Ladd Yost says
To the people saying this is just an investment for the rich, I say “balderdash”. I was never interested in these accounts until they were allowed to be rolled over year to year. It’s just sensible to build up your balance for an expensive procedure that may be coming down the pike.
You must spend it ultimately on health care, so what’s the problem? We’re by no means rich, but it’s good to know we have built up a few thousand dollars pre-tax to take the sting out of the high deductible if the health hits the fan. Our employer also drops in some every year, sharing the savings of a high deductible plan with us.
Linda Sanford says
When is the soonest we can contribute to our HSA for year 2016?
Harry Sit says
January 1, 2016, if you can find anyone open on New Year’s Day.
Betsy says
I have been and am currently participating in my company’s HDHP + I have an HSA. I have family coverage. My husband is already 65 but covered primary on my HDHP as I am still working. I will be 65 later this year and will then go on Medicare as I will retire. Can I make my family $6750 HSA contribution for 2016 now before I go on Medicare?
Britt C says
Without doing to much research I’d assume that you would be able to make the contributions while covered by the HSA plan, once you went onto medicare you would not longer be able to make the contributions (you won’t fall under the December 1st HDHP coverage safe harbor as you will likely retire before this date).
Divided up between 12 months the monthly contribution would be $562.50 per month for family coverage; I would think you would be safe making this for the months you continue to have coverage through 2016. IF you know the month you are retiring/going to medicare, only make you contribution for the number of months you will have coverage if trying to make the contribution in a lump amount.
On another note… if you only did $6,650 last year you can make another $1000 for 2015, and you can make $83.33 per month additional this year as the IRS allows those over 55 to make a catch-up contribution. Look up HSA catch-up contribution rules for more information.
HSA Contribution Limit For Two Plans Or Mid-Year Changes
More info
Betsy says
Thank you!
carlene says
If I have not contributed the max amount for 2015 and it is now feb, 2016, can I make it up by depositing more before my taxes are done?
Britt C says
Yes, you can even do it after your taxes are done and claim on your taxes when you file (even though you haven’t made the deposit yet- just make sure you make it before April 18th if you claimed it on taxes)
HSA deduction rules follows the same rules as IRA contributions, just need to be done by the tax filing deadline prior to extension (April 18th this year).
From Publication 969:
“When To Contribute
You can make contributions to your HSA for 2015 until April 18, 2016. If you fail to be an eligible individual during 2015, you can still make contributions, up until April 18, 2016, for the months you were an eligible individual. ”
https://www.irs.gov/publications/p969/ar02.html#en_US_2015_publink1000204020
Rebecca Bossie says
Our family has a total deductible of $3000, ($1000 per person) now by these numbers am I still allowed to contribute to our HSA? I only contribute 1300 per year. We have tricare, if that helps.
Britt C says
TRICARE is not HDHP eligible, see:
http://healthsavings.com/who-is-eligible-for-an-hsa/
I can’t find this anywhere in the IRS code, but several different HSA account websites state that Tricare is not eligible.
Jim Scherer says
Before retiring I had a HDHP health insurance plan through my employer and covered my son and wife as dependents. My wife and I transitioned to Medicare however our son– who is in law school–is still our dependent, and we pay for our former HDHP, health insurance plan to cover him, and we pay all deductible, co-pays, etc. Is there anyway, an HSA can be setup–we know that the HSA rules are that our son cannot setup up an HSA because he is a dependent on our tax return, and neither of us can setup an HSA because we are on Medicare; however, it seems like the spirit of the HSA law should, somehow, allow an individual HSA to be setup to offset our son’s medical expenses.
Britt C says
I can’t think of anyway around this currently, sorry…
Karen says
If my husband and I are on separate individual HDHP accounts and we each contribute half the family limit to our HSA accounts, can we pay each others medical bills with HSA dollars or can we only use HSA dollars to pay our own medical bills?
Harry Sit says
You can pay each other’s bills with the money. Your limits are two singles, not exactly half the family limit.
David says
Hello,
If I have a 1000$ deductible and limit of 4000$ out of pocket am i allowed to have an Hsa? I am paying my health insurance by myself and I want to have an individual hsa
Britt C says
2016 minimal deductible amount for individual is $1,300. An HSA plan will usually clarify that it is eligible. Also need to consider Copay’s etc; if your plan has copays for office visits, it is most likely not an HSA. When your shopping insurance most providers or brokers can provide you with a filter or list of HSA eligible plans.
Charles says
My wife has an HSA in her name as I have medicare and she is only 57. In 2016 she selected an ACA plan off the exchange that has a $4200 deductible and a $6600 maximum out of pocket. Can she make an HSA contribution for 2016 or is it not possible since the maximum OOP is $50 higher than the $6550 listed in your article? If so, the MAX OOP is now “oops” as she hoped to contribute. Also, if that is the case it seems devious to offer such a plan knowing the deductible qualifies but the max OOP disqualifies. Been hard to clarify this so far.
Harry Sit says
Her plan has to be specifically marked as HSA-eligible. The minimum deductible and the maximum OOP are two requirements adjusted for inflation every year but they are not the only requirements. Other features of the plan can disqualify it as well. If she wants to contribute for 2017, make sure she selects a plan that says HSA for 2017.
Britt says
As Harry stated, it depends on more than these limits. For example if the plan has any copays before deductible is met it is not HSA eligible. HSA plans will usually be clearly marked that they are HSA eligible.
Tony says
Dear Harry,
On October 15th you responded to Robert’s question regarding catch-up contributions.
and in your reply you said that since the account is in his name only he could make contributions to the account. Did you mean only he could make a catch-up contribution or that he is the only one that can contribute anything to that HSA?
My spouse and I are considering reducing to one HSA account and realize we could only have one catch up contribution. From what I understand however any family member can contribute to the family maximum for the year either personnally or thru our employer; is that correct? Thanks!
Harry Sit says
In that same reply I said he could contribute the family maximum because he had a family plan. If both your employers contribute, you will need two accounts, one in each name. If both of you qualify for and want to contribute the age-55 catch up, you will need two accounts. If you have separate individual plans, you will need two accounts.
Tony says
When I married, we each were covered under our own HDHP plan with each having our own HSA. I chose to be covered under my spouse’s plan. What are my options regarding the HSA account under my old HDHP plan? Can I continue it? Can its balance be transferred to my spouse’s account? Should it have been dissolved when the insurance policy ceased?
Harry Sit says
See HSA Contribution Limit For Two Plans Or Mid-Year Changes. You calculate how much each of you can contribute based on a month-by-month schedule. The money already in your HSA can be kept in your HSA or used to reimburse qualified medical expenses incurred by either of you. It can’t be merged into your spouse’s account.
Vid says
Hello
My family is covered in HDHP plan for this entire year, my employer(actually a vendor who manages HR operations for my company) is restricting my monthly contribution while I have qualifying medical expenses to pay immediately and I am running out of HSA balance.
Example – my annual limit is $6750, my HSA balance was $4000 and I issued cheque for all $4000, now there are bills for $1500. Can I ask my employer to take $1500 out of my next payroll pre-tax and put it in my HSA ?
( I did ask and they said no, are they allowed to say NO ?, is there an IRS provision for them to say NO ?)
Can an employer stop and employee from moving extra money pre-tax from payroll to HSA ( provided employee will still be under the annual contribution limit)
Kindly clarify, appreciate your time.
Harry Sit says
Yes the employer can do that.
Vid says
That’s a bad situation. What entitles an employer to do that, when it is employee’s pre-tax money and employee’s HSA account ?
Could you clarify please ? (Under what provision of IRS?)
I read that the maximum contribution can be done at any time during the tax year.
There’s only a yearly limit, as long as I’m covered by HDHP for whole year, the contribution frequency or amount shouldn’t be a question.
Harry Sit says
Because officially it’s an employer contribution. You made agreement with the employer to let them contribute on your behalf. They do it on their schedule. If you don’t like that, don’t make such agreement and you will then contribute on your own, on your schedule. You will have to pay payroll taxes when you do it on your own though.
Vid says
It is still my money, IRS says I can contribute the whole amount at one shot.(ref publication 969).
So the employer should be flexible to abide by IRS rules. IRS is the big brother.
Harry Sit says
No, during open enrollment you asked your employer to contribute on your behalf. In doing so you gave up the flexibility in exchange for convenient pre-tax deductions and payroll tax savings. If you didn’t choose that you would be flexible in when you contribute.
John says
Your employer HR is being pricks…
You won’t find IRS regulations saying either way that you have to or don’t have to allow changes to elective deferrals. If your employer is already allowing you to make pre-tax HSA contributions they have a 125 cafeteria plan in place.
FYI from https://hsaresources.com/faq/#emp-07 – a HSA custodian bank-
“9. How often can an employee adjust their HSA contribution when contributing through a cafeteria plan?
Employees contributing to an HSA through a cafeteria plan may make adjustments to their contributions at any time, as long as the change only affects future contributions.”
Just because you elected to contribute a set amount each month at open enrollment doesn’t lock you into this and you can elect to change it or stop it (most employers will state a period of notice for this to be done). Now the insurance is a different story, you’ll need a life changing event to change that. IF you HR has anyone else you can talk to with more knowledge, I’d recommend doing that, but if you’ve gone as high as you can go you might be out of luck. If they are that unaware about the rules for elective deferrals, make sure you are reconciling all your payroll items very closely.
Alternative is to just bite the bullet and make the max contributions on your own and inform them you have contributed an need your elective deferral turned off, or setup a payment plan with your medical bills and pay as funds are in the account. You can always keep track of the expense if you want to pay now and reimburse yourself out of the HSA when you put the funds in later throughout the year….
Personally I have 14k worth of expense to reimburse myself out of my 28k balance HSA…
Harry Sit says
John – The IRS allows changes but it doesn’t require the employer to allow changes. Therefore the employer can set their own policies stricter than the IRS.
Vid says
Makes sense and thanks for the detail John.
Raising the Contribution limit is not a problem(example newborn) nor is stopping the monthly election. I can do that in a heartbeat, the company allows that, no questions asked.
The only issue is to allow me to raise the election amount so I can pay my bills faster. Like, allow me to deposit my whole payroll for a month into my HSA so I can issue 4 cheques to service providers. This is not happening, they are not allowing me to contribute more per month(still staying within annual limit).
I wish companies become more sensitive in issues like these. It does not make sense. My money, my HSA my bills, company shouldn’t have a say. Even if I contribute in excess(imaginary situation) to the annual limit, it is going to be between me and IRS & 20% penalty and reciprocation, employer need not poke his nose into this matter or set rules at all.
If I had to deposit my taxed money into my HSA, I am at loss end of the day. Ain’t i ? ( tax returns would get me back the dollars lost here ? )
John says
Federal Income Tax wise you’ll get an above the line deduction lowering your AGI (making up for the fact that the amount is now on your W-2) so you net out there. You’ll likely have a larger refund (due to your employer withholding on the amounts for FIT when ultimately you’ll be removing it).
The area you lose is on Social Security and Medicare if your contributing through a 125 Cafeteria plan at work (which it seems you are). However if your over the SS limit for the year, your not saving anything on that part 6.2%, and are just losing out on the savings on the Medicare tax (1.45%). The net difference annually on this between contributing yourself or through your employer is about $500 (with about $400 from the SS savings).
Here’s another option for you…. contribute it now and let your employer keep taking your deductions (you seem to be in a financial situation to be able to afford to do this if you were going to have them withhold $1500 on a pay period). Pay your bills, at the end of the year once your deductions have come out of payroll and you have the funds back in your HSA, file a correction with the custodian for the amount you’ve now over contributed to be returned to you. Not the easiest way to go about it but works.
Another option, pay with out of tax money now and keep your recipts and bills and just reimburse yourself in December when the funds are in your HSA account. You can reimburse yourself for any medical expenses that were paid after you opened the HSA account. Like I said earlier I have a excel file with all expenses paid out of after tax dollars to reimburse myself in about 30 years out of my HSA that is invested and growing tax free. Two babies in the past year and other little incidents and I have close to 14k to reimbursement in about 30 years lol.
Great thing about HSAs are they are taxed just like a pre-tax IRA once you get to retirement age on amounts you withdraw that exceed HSA eligible expenses or reimbursements for past payments.
John says
additionally to above,
I allow my employees to change theirs whenever they want with a form filled out…. I would assume most employers have competent people in payroll and HR that can do this for their employees as it is possible. We have close to 100 employees and they have those options with their elective 401k deferrals and their elective HSA contributions.
Vid says
Good to know about these facts in detail, John. Thanks for your time and advise.
Justin says
Hello,
I am currently contributing to an HSA through my employer for 2016. My HDHP that I chose during open enrollment only included myself because my wife is medically insured through another provider, but she does not have an HSA. Is my annual contribution limit the $3,350 for self-only, or am I still eligible to contribute the family maximum of $6,750 since I am married?
Thanks.
Harry Sit says
Self-only.
James McGabbin says
I used to have my HSA contributions auto-debited (pre-tax) from my monthly paycheck by my former corporate employer. I quit that job in May of this year (2016) and I’m now self-employed through an LLC (as sole-proprietor). I’m currently covered under an HSA-eligible HDHP through the Affordable Healthcare Act (Obamacare). I have continued to contribute to my HSA (about twice/month) and, as a self-employed performing artist, my contributions are naturally “pre-tax” contributions. What difference will there be in my tax filing with regard to reporting my medical costs (pre- vs post-tax, etc.) for my time spent in self-employement?
John says
How are you considering contributions now “naturally “pre-tax””? In reality you are drawing from your LLC and contributing after-tax to the HSA, as such you’ll report this on your tax return and have an above the line deduction for these contributions you’ve made as self employed.
This is the case if your a single member LLC (reported as a schedule C on your 1040). I assume this is the case since you referred to yourself as self-employed. However if you set the LLC up as a corporation or partnership and you actually run payroll for yourself and pay payroll taxes and the your separately reported LLC is contributing for you then you’ll see that on your W-2 to yourself from the LLC. You’ll want to make sure you have a 125 cafeteria plan etc setup. I seriously doubt this is the case since you said you got a HSA on the exchange. Be careful if you got credits and you end up with more income then you claimed when applying for the year (you’ll owe it back at tax time).
Hopefully you have a tax advisor, I would talk to them about this and make sure you are all on the same page (for HSA items and for estimated tax payments now that you self-employed).
Vickie says
Had a high deductible from January 1-September 30. Opened up an HSA. Can we fully fund this for the whole year or is it prorated? This after we cancelled the high deductible insurance.
Harry Sit says
Prorated. See link to “mid-year changes” in the article.
Renee says
I quit working in June and thought at the time it would be best to max out my family HSA ($6750) which included my and my company’s contribution ($3000).
I didn’t think at the time that when we switched to my husbands insurance, we also decided to go with his HSA. In the beginning is his HSA account did not have a balance. But now I see that his company deposited a contribution of $1050.
Can you help me and what do you suggest that I do so that I can keep the money from his company, which is free money and pay taxes on my own money that I deposited before I left my job?
Harry Sit says
Call your HSA provider and ask for a form to withdraw part of your contribution as excess contribution.
Renee says
Thank you Harry. I have asked for the excess contribution form. Will I pay the taxes on this money when I file for 2016 or is some other action required of me prior to?
Harry Sit says
If you made the excess contribution pre-tax through your employer, and your W-2 is lower as a result, you will report the excess as income on your tax return. If you made the excess contribution with post-tax money on your own, after you withdraw the excess contribution, it’s as if you didn’t contribute the excess to begin with. Either way, the HSA provider will also return to you any earnings associated with the excess contribution. You report the small earnings as income on your tax return. See Form 8889 Instructions for more information.
Mark says
As of October 1, 2016 I have and individual HDHP HSA. I am also 56 years old. If my employer allows through payroll deduction can I contribute the whole 4350.00 before December 31, 2016?
Harry Sit says
See HSA Contribution Limit For Two Plans Or Mid-Year Changes.
John says
I think the simple answer is yes, I didn’t see this in the link on the other reply, but publication 969 states:
“Under the last-month rule, you are considered to
be an eligible individual for the entire year if you
are an eligible individual on the first day of the
last month of your tax year (December 1 for most taxpay-
ers).”
This is under the section “qualifying for a HSA”.
IF you continued to have the coverage for rest of year, under this part of the law your good to make full contribution for the year (considered being eligible for entire year).
Harry Sit says
It would be a “yes, but …” I added a section about the last month rule in the “mid-year changes” post. The short answer is I don’t recommend using the last month rule.
Kathy says
I understand that you can contribute to HSA up until age 65 and medicare eligible, but will I be able to take the AGI tax credit on that contribution amount if I am retired but not 65 yet? I had heard you can only take the tax credit on HSA contributions if you have earned income and was told that pension and interest alone are not considered “earned”. I found one statement in IRS publication 969 that says that you can’t contribute to HSA after retirement , nothing specific about “earned” income.
Harry Sit says
It’s a deduction, not a tax credit. There is no requirement for having earned income.
Naor says
Hello,
1. So, I changed my plane to an HSA, is anyone know if i can contribute this year to the account before the end of the year and again next year?
2. any recommendation on what is the best bank to open an account with ? i am looking for a low fee and option to trade/ invest with the money i have there
Thank you all for your help
Harry Sit says
If the change is effective January 1 next year you can only do it next year. Otherwise see the “mid-year changes” article linked here. For where to open an HSA, see Best HSA Provider for Investing HSA Money.
Naor says
Thank you, it look like the element will be the best choice
Stephanie says
Hi there. I’m on an individual blue shield plan, which, though quite expensive and going up 25 % in January, is still cheaper than going on my husband’s plan through work (they have a very small company). I’d like to get an HSA. I’m really confused by the limits though. The minimum deductible is $1,300 — mine is $2, 500 so I’m good there. What’s confusing is the maximum out of pocket. The limit seems to be $6,550.
I would think that this is a minimum number for the maximum — because the higher your maximum out of pocket, the more money you may need to spend and the more you need an HSA. But it’s written as a maximum. So if my maximum out of pocket expense is $6,800, then I’m NOT eligible for a tax break, but if it were $250 LESS I would be? That seems to be what the rules are, but that doesn’t make sense to me.
So, could you help me out. With my limits of 2500/6800, am I eligible?
MANY THANKS.
Harry Sit says
No, your plan does not qualify. The out-of-pocket limit is indeed a maximum. See Not All High Deductible Plans Are HSA Eligible.
Mich says
I have my wife, 2 kids and myself on a HDHP through my employer. My wife has a job, but her health insurance is through my employer, since her employer offers plan that is not so good. Also, we have a HSA account because of my plan.
Can I pay my wife’s health expenses with HSA? My understanding is no, since you can use money to pay for yourself and people you claim as dependants on your taxes. She has a job, so she is not my dependant. Her employer offers FSA, so we were thinking that she can contribute $750 to her FSA, I’ll contribute $6,000K to HSA for kids and myself. Does this make sense?
Thank you!
Harry Sit says
You can pay your wife’s expenses out of your HSA. She shouldn’t enroll in FSA at her employer. It will make you ineligible to contribute to your HSA.
Mich says
Thank you!
Stephanie says
Thanks, Harry for your answer about the limits. Doesn’t make a lick of sense to me, but that’s insurance in America today. Drats.
John says
Most often HSA eligible plans will advertise the status… Does your plan have copays for office visits? Often plans will meet deductible limits and not be HSA because they have copays (HSA have no copays and do not pay out anything till you meet the deductible – you do however get preventative at 100% and the in-network discount the in network providers have agreed to)
Dee says
My husband and I are covered by identical self-only HSA-qualified plans (we have no dependents, so 2 individual policies were the same cost & coverage as putting us both on one family plan). What is our contribution limit for 2016, $6700 ($3350×2) or $6750? Would the answer be different if we were on one family HDHP vs 2 individual ones?
John C says
Did I overpay my HSA for 2016? My family limit is $6750, but I contributed $7000. However, I’m over 55 years old, so do I actually have up to $7750 before I overpay my contributions for the year? In other words, does the Catch Up of up to $1000 HAVE to be a one-time, after-tax or can it be pre-tax via payroll along with the rest of my contributions?
Harry Sit says
It can be either.
Steve says
Hello,
I am on a HDHP plan through my employer and I have an individual HSA , my wife is not under any insurance plan so can I use the family contribution amount of $6750 instead of the individual amount of $3400 for 2017 so I get the pre-tax savings and also be able to pay for my wife’s medical expenses this year?
Thanks,
Steve
Harry Sit says
No, if your plan only covers yourself you have the individual limit. You can still use the money on her expenses though.
Phoebe says
Harry–If a taxpayer opens an HSA in 2017, and applies and becomes covered under a qualifying HDHP in 2017, they can’t retroactively make contributions toward the 2016 year, correct? Since they wouldn’t have the eligible coverage in 2016? If a contribution toward 2016 IS allowed, I understand it wouldn’t be deductible, but would the contribution be allowed, at all? As a non-deductible contribution–allowing earnings to grow tax-free?
Harry Sit says
Not allowed if you didn’t have HDHP.
Chris says
I have a contribution question. I put in $3,500 in my HSA before Dec 16 to utilize the last month rule and to max out the yearly contribution limit. As far as I understand it, that amount counts for all of 2016 as long as I pass a holding period of 13 months.
I was also looking to put an additional $3,500 for this year (2017) in asap, but I wasn’t sure if I’m prohibited from doing so currently being in the holding period for last year’s contribution.
Another way to ask this: Can I contribute another yearly max contribution while in the following months of a testing period from a prior contribution?
Harry Sit says
Yes you can.
Chris says
Thanks for the speedy response Harry,
As a follow up question: Since it’s the middle of the year, I haven’t contributed any funds to my HSA for 2017, and I don’t want to be subject to another testing period for my 2017 contribution. How do I avoid this testing period?
Since I’ve been eligible all year, and will continue to be, is there any harm in just one contribution of 3350 this month so I can have this out of sight out of min for the rest of the year?
Thanks,
Harry Sit says
As long as you stay eligible the entire year you can contribute the full amount now.
Chris says
Thank you so much
Tim says
A single widowed parent, at 55 years old, can contribute $7,750 pre-tax for 2017 correct? Dependent child is in college, 20 years old, and has sole insurance through my HSA.
Harry Sit says
You must be in an HSA-eligible high deductible plan with no other coverage; and that plan has to cover two or more persons; and you have to be in this situation for all 12 months in the year. If you meet all these conditions then it’s $7,750.
Tim says
Thank you, Harry. I thought so.
Purposely stayed at $6,750 for this year, just because I had to be sure about the 55 year old start for an extra $1000. As you pointed out.
Next year, though it will be $7,900 (new limit for 2018, family/55+). Want to get as much in, as my college age daughter could change it up any time, ceasing to become a dependent.
The HSA, one of the best tax strategies around for the healthy. Though comprehending the financial numbers, and IRS rules, is a challenge.
It is one of the very few Tax benefits which can be a “triple play”. Tax free to contribute, tax free to grow, and tax free to use for retirement health care. Figuring out how to maximize the benefits takes some education.
Leah Chapman says
If an employee wanted to maximize the year’s allowable HSA contributions, but did not start from the 1st of the year, is there any regulation that stops them from doing this? In other words, let’s say someone didn’t contribute all year, but on their last paycheck decided to put the whole amount into their HSA, could they do that?
Harry Sit says
Yes they can do that.
Leah Chapman says
Thank you for your fast reply!
Can an employer limit you from doing this in their plan design?
Harry Sit says
This document says employers must allow changes at least monthly.
https://www.careplusbenefits.com/Portals/0/InSite/Compliance/Flex%20Benefits/HSA%20Contribution%20Rules%206-30-15.pdf
Loretta says
My husband’s company is transitioning to an HDHP in January, for which they kick in $1000 per family. We had an ineligible plan this year and no FSA. He is 61 and I am 65. I signed up for Medicare Part A in June and have not used any benefits. I can opt out of Part A within 12 months. Can he contribute the full family amount to his HSA? His company is large, so his coverage is primary, so I wonder if I should drop Part A on myself and use the tax advantage of the HSA.
Thanks for your website!
Harry Sit says
If his plan covers both him and you, he can contribute at the family coverage level. You can’t contribute. However covering a spouse usually costs more than covering just the employee. The two of you should decide whether you should stay on his company’s insurance or just go on Medicare alone.
Kay Lueck says
My husband and I both have separate health plans. His is an individual plan and I’ve enrolled in a family plan so that he has secondary coverage. My plan is HSA eligible, his Is not. Can I fund the family Max in my account since I have a family plan .
Harry Sit says
Yes if you don’t have other coverage such as an FSA from him.
Nancy Blattner says
my husband and I are both over 55, and covered by his employer in a HDHP. Your article says I would need to open my own account to be able to contribute the extra $1000 for myself as well as my husband contributing his extra $1000. I can’t have an HSA thru my company as I don’t carry insurance with them. How do I open my won plan? Would it then be taxed before I contribute it?
Harry Sit says
Some banks and credit unions offer Health Savings Accounts. You open your HSA directly with them. The money you contribute comes out of your post-tax income first. You claim a deduction when you file your tax return. When your husband contributes pre-tax money through his employer, you don’t claim a deduction for that amount again because it’s already pre-tax.