The IRS recently released 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 a Health Savings Account
An HSA is a trust that is designed to pay for the “qualified medical expenses” of an “account beneficiary.” It can only be set up for an “eligible individual” who is covered under a “high-deductible health plan.” It’s important to note that Medicare enrollees or those with other health coverage (with the exception of dental, vision, long-term care, accident, and specific disease insurance) are not eligible to participate.
A high deductible health plan (HDHP) is generally a plan with an annual deductible that isn’t less than $1,000 for self-only coverage and $2,000 for family coverage. Additional annual out-of-pocket expenses (but not premiums) for covered benefits under the plan must not exceed $5,000 for self-only coverage and $10,000 for family coverage.
Individuals can deduct above-the-line contributions to a Health Savings Account within specified dollar limits. 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 2024 inflation-adjusted figures for contributions to Health Savings Accounts, which are as follows:
Annual contribution limitation: 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.
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).
Health 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).
Advantages of Health Savings Accounts
There are a variety of benefits to HSAs. Pre-tax contributions are made to the accounts. This money can accumulate tax-free year after year, and it can be withdrawn tax-free to pay for various medical expenses, including doctor’s visits, prescriptions, chiropractic care, and long-term care insurance premiums. In addition, a Health Savings Account has the benefit of being “portable,” meaning it remains with the account holder even if they switch employers or retire. Many employers find it to be a fringe benefit that attracts and retains employees. If you have any inquiries about implementing HSAs for your business, contact us or one of Landmark Financial’s Certified Employee Benefit Specialists.
© 2021. Updated June 2024.