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 holder and their qualifying dependents. 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 low deductible health insurance (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:
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 The money can accumulate tax-free year after year and can be withdrawn tax-free to pay for a variety of medical expenses such as doctor visits, prescriptions, chiropractic care and premiums for long-term care insurance.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. Nicholle Peterson, Benefit Plan Manager, provides key takeaways to consider:
- Maximize Contributions: Take advantage of the increased contribution limits for 2025—$4,300 for self-only coverage and $8,550 for family coverage. Those aged 55 or older can contribute an additional $1,000.
- Utilize Tax Benefits: Contributions to HSAs are made on a pre-tax basis, and funds can grow tax-free and be withdrawn tax-free for eligible medical expenses.
- Portability and Flexibility: HSAs are portable, meaning they stay with you if you change jobs or leave the workforce, offering long-term financial benefits.
If you have questions about HSAs at your business, contact our CDS Benefit Plan Administration experts at (888) 388-1040.
