How can a health savings account help me?


A health savings account (HSA) is a medical savings account that allows for the payment of qualified medical expenses on a pre-tax basis (meaning taxable income for the IRS is reduced by the amount of the deposits; each state has its own rules...CA does not conform to Federal law on this). If funds are withdrawn for non-qualified expenses, the account holder will be liable for income taxes and an early withdrawal penalty.
 
The account is only available for those who have a health insurance plan with a high-deductible.

High-Deductible Health Plan (HDHP) Requirements:
  • 2024 tax year
    • Self-only plans = deductibles of $1,600+ and maximum out-of-pocket of $8,050
    • Family plans = deductibles of $3,200+ and max out-of-pocket of $16,100.
  • 2025 tax year
    • Self-only plans = deductibles of $1,650+ and maximum out-of-pocket of $8,300
    • Family plans = deductibles of $3,300+ and max out-of-pocket of $16,600.

If you're not eligible for the entire year, your contribution limit may be prorated based on the number of months you're eligible.

Max Contributions Amounts Allowable:
  • 2024 tax year = $4,150 for self-only plans and $8,300 for family plans.
    • Age 55 or older = $1,000 additional (each spouse must have their own HSA to make the $1,000 catch-up contribution for both over age 55; otherwise, only $1,000 additional total allowed on family plan)
  • 2025 tax year = $4,300 for self-only plans and $8,550 for family plans. 
    • Age 55 or older = $1,000 additional (each spouse must have their own HSA to make the $1,000 catch-up contribution for both over age 55; otherwise, only $1,000 additional total allowed on family plan)

The contribution deadline for a given tax year is up until the filing deadline for that year, typically April 15 of the following year.

Unlike flex-spending accounts, HSA funds do not expire and can roll over year after year, allowing for accumulation if not spent.

Health Savings Accounts also offer one of the best "investment" vehicles out there for retirement planning. Check out this article for a great strategy to consider employing!
 
Feel free to contact us if you have questions on whether an HSA account is right for you.

Updated 1/21/2025