HSA Contribution Limits
What Are HSA Contribution Limits?
HSA contribution limits are the maximum dollar amount you are allowed to contribute each year to a health savings account (HSA).
What Is a Health Savings Account?
An HSA is a way to set aside money that has not been taxed to pay for your medical expenses. The money’s earnings are tax free, and there are no taxes when you withdraw money to pay for qualified medical expenses. Your money goes a lot further because of these tax advantages. And unlike flexible spending accounts, you won’t lose your money if you don’t spend it all by the end of the year. It can stay in your HSA as long as you like.
Only people who have a high-deductible health plan, also known as an HDHP, qualify for a health savings account. High-deductible health plans have lower premiums but higher out-of-pocket costs; an HSA helps offset those costs.
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What Are the Current HSA Contribution Limits?
For 2020, eligible persons with self-only HDHP coverage are allowed to contribute up to 3,350 dollars. If they have family HDHP coverage, they can contribute up to 7,100 dollars.
Eligible individuals who are 55 or older by the end of the year are allowed to make an additional catch-up contribution of up to 1,000 dollars.
What If You Exceed the HSA Contribution Limits?
More isn’t better. If you contribute more than the HSA contribution limits, the excess is subject to income tax and you will also have to pay a six percent excise tax on the excess every year. This may be avoided if you withdraw the contribution and its earnings before filing your taxes.
Do HSA Contribution Limits Ever Change?
HSA contribution limits have changed numerous times in the past, and they almost certainly will continue to change in the future. That’s because each year the Internal Revenue Service (IRS) adjusts the amount you’re allowed to contribute to an HSA for inflation. Similarly, the IRS also adjusts the amounts that define what qualifies as a high-deductible health plan.