Health savings accounts (HSAs) let you save and pay for qualified medical expenses with tax-free dollars.1 But there are limits to how much you can contribute each year. Overcontributing can lead to unexpected tax penalties. Keep these rules for HSA contributions in mind. And remember: In order to contribute to an HSA, you have to be enrolled in an HSA-eligible health plan.
HSA contribution limits
Every year, the Internal Revenue Service (IRS) sets the maximum that can be contributed to an HSA. For example, if your HSA contribution limit for the year is $3,850 (as it is in 2023) and your employer contributes $1,000, you can only contribute $2,850—unless you're eligible for a catch-up contribution of $1,000.
The amount you can contribute to an HSA each year is determined by whether you are enrolled in self-only or family coverage and if you are age 55 or older.
2023 HSA contribution limits
The HSA contribution limits for 2023 are $3,850 for self-only coverage and $7,750 for family coverage. Those 55 and older can contribute an additional $1,000 as a catch-up contribution.
2024 HSA contribution limits
The HSA contribution limits for 2024 are $4,150 for self-only coverage and $8,300 for family coverage. Those 55 and older can contribute an additional $1,000 as a catch-up contribution.
To contribute to an HSA, you must be enrolled in an HSA-eligible health plan. For 2023, this means:
- It has an annual deductible of at least $1,500 for self-only coverage and $3,000 for family coverage
- Its out-of-pocket maximum does not exceed $7,500 for self-only coverage and $15,000 for family coverage
And to contribute to an HSA you must:
- Not be enrolled in a health plan that is not an HSA-eligible plan, such as a full purpose health care flexible spending account (FSA)
- Not be enrolled in Medicare
- Not claimed as a dependent on someone else's tax return
HSA contribution deadline
You generally have until the tax filing deadline to contribute to an HSA. For tax year 2023, you can make contributions up until April 15, 2024.
HSA contribution limits when you aren't enrolled in an HSA-eligible health plan for the full year
If you aren't enrolled in an HSA-eligible health plan for the full year, you may only be able to contribute a portion of the allowable amount. Although, if you're covered on December 1 of a given year, you may be able to contribute the maximum amount allowed.
You can calculate your prorated contribution amount by counting the number of months you were enrolled in an HSA-eligible health plan on the first of a month and dividing it by 12. Then multiply the number by the total amount you could contribute if you were eligible the whole year. If you have single coverage and were enrolled in an HSA-eligible health plan at the start of the year and your coverage ends on May 31, 2023, for example, you could contribute $1,604 as an individual that year.
HSA contribution limits when you are enrolled in an HSA-eligible health plan as of December 1
If you are enrolled in an HSA-eligible health plan as of December 1 of a given year, you can contribute the maximum amount you're eligible for, per the IRS's "last-month rule." This is true whether you've been enrolled in an HSA-eligible health plan for 1 day or 185 days. The last-month rule comes with an important catch, though.
You must stay enrolled in an HSA-eligible health plan for a one-year "testing period" running from December 1 of the year you contribute to December 31 of the next year. If you are no longer enrolled in an HSA-eligible health plan during that year, you then must pay income taxes—as well as a 10% penalty—on any excess contributions you made when you file your tax return.
HSA tax penalties
While HSAs offer valuable tax benefits, they also come with tax penalties, if you contribute too much in a given year or use the money to pay for ineligible expenses.
If you exceed the annual maximum contribution limit, you may face a 6% excise tax on your excess contributions in the year you overcontributed and in each year you fail to remove the excess contribution and its earnings. The excess contribution is also considered taxable income. If you correct the error before the tax filing deadline for the year, you may be able to avoid income tax and the excise tax for that year.
If you use HSA dollars for ineligible expenses, you'll be charged a steep tax penalty. If you do so under the age of 65, you'll have to pay a 20% penalty plus any applicable income taxes on what you withdraw. If you're 65 or older, you can use HSA money for ineligible expenses penalty free, though you'll have to pay income taxes.
HSA vs. health care FSA
Health care flexible spending accounts (FSAs) are another common way people use tax-advantaged dollars to save for qualified medical expenses. While it may seem like double-dipping, you can actually contribute to an HSA and health care FSA, provided your FSA is "HSA-compatible." This means that it's a limited purpose FSA that can be used to pay for certain qualified expenses, like vision or dental.
When used together, an HSA and limited purpose FSA can help you save for qualified medical expenses each year. In 2023, typically you can contribute up to $3,050 to a limited purpose FSA—on top of what you can contribute to your HSA. Keep in mind, though, that health care FSA funds are typically subject to the "use it or lose it" rule. You must use all contributions within the year or forfeit whatever's leftover, with some exceptions. HSAs, meanwhile, do not have this rule, allowing you to save and invest contributions year over year.