The IRS recently released guidance providing the 2025 inflation-adjusted amounts for Health Savings Accounts (HSAs).
These amounts are adjusted each year, based on inflation, and the adjustments are announced earlier in the year than other inflation-adjusted amounts, which allows employers to get ready for the next year.
Fundamentals of HSAs
- An HSA is a trust created or organized exclusively for the purpose of paying the qualified medical expenses of an account beneficiary.
- An HSA can only be established for the benefit of an eligible individual who is covered under a high-deductible health plan (HDHP).
- In addition, a participant can’t be enrolled in Medicare or have other health coverage (exceptions include dental, vision, long-term care, accident and specific disease insurance).
- Within specified dollar limits, an above-the-line tax deduction is allowed for an individual’s contribution to an HSA.
- This annual contribution limitation and the annual deductible and out-of-pocket expenses under the tax code are adjusted annually for inflation.
Inflation adjustments for 2025
In Revenue Procedure 2024-25, the IRS released the 2025 inflation-adjusted figures for contributions to HSAs, which are as follows:
- Annual contribution limits.
- For calendar year 2025, the annual contribution limit for an individual with self-only coverage under an HDHP will be $4,300.
- For an individual with family coverage, the amount will be $8,550.
- These are up from $4,150 and $8,300, respectively, in 2024.
- In addition, for both 2024 and 2025, there’s a $1,000 catch-up contribution amount for those who are age 55 or older by the end of the tax year.
- High-deductible health plan limits.
- For calendar year 2025, an HDHP will be a health plan with an annual deductible that isn’t less than $1,650 for self-only coverage or $3,300 for family coverage (these amounts are $1,600 and $3,200 for 2024).
- In addition, annual out-of-pocket expenses (deductibles, co-payments and other amounts, but not premiums) won’t be able to exceed $8,300 for self-only coverage or $16,600 for family coverage (up from $8,050 and $16,100, respectively, for 2024).
Heath Reimbursement Arrangements
The IRS also announced an inflation-adjusted amount for Health Reimbursement Arrangements (HRAs).
- An HRA must receive contributions from an eligible individual (employers can’t contribute).
- Contributions aren’t included in income, and HRA reimbursements used to pay eligible medical expenses aren’t taxed.
- In 2025, the maximum amount that may be made newly available for the plan year for an excepted benefit HRA will be $2,150 (up from $2,100 in 2024).
Collect the benefits
There are a variety of benefits to HSAs that employers and employees appreciate.
- Contributions to the accounts are made on a pre-tax basis.
- The money can accumulate tax-free year after year and can be withdrawn tax-free to pay for a variety of medical expenses such as doctor visits, prescriptions, chiropractic care and premiums for long-term care insurance.
- In addition, an HSA is “portable.” It stays with an account holder if he or she changes employers or leaves the workforce.
- Many employers find it to be a fringe benefit that attracts and retains employees.
If you have questions about HSAs at your business, contact us .
