The 2024 HSA Contribution Limits Explained

Health savings accounts, or HSAs, allow you to save and pay for eligible medical expenses with tax-free money. While there’s a tax advantage to contributing money to an HSA, the IRS sets limits to how much you can contribute each year. Exceeding these contribution limits can result in tax penalties.

You must be enrolled in a HSA-eligible high-deductible health plan to contribute. If you’re eligible for one, it’s important to follow the 2024 HSA contribution limits to avoid penalties. Read on to learn more about how much you can contribute this year.  

How Does an HSA Work?

All earnings inside of an HSA account are tax-deferred until they are withdrawn. When they’re used to pay for qualifying medical expenses, these withdrawals are always tax-free for the account holder. Similar to a 401(k), 403(b), IRA, or Roth IRA, any income, dividends, or capital gains you earn in your HSA account is not taxable in the year in which it is earned, no matter how much you make in your account, from year to year.

Most HSA custodians allow you to invest the money in your self-directed HSA account in almost any type of investment security or savings vehicle you wish, from a simple money market fund or bank-issued CD all the way up to mutual funds, ETFs, and individual stocks and bonds. This allows the money in your HSA to keep pace with the rate of inflation in medical expenses (which has been running at about twice the general rate of inflation for the last 15-20 years). Contributions may be made by you or by someone else on your behalf, including someone who is not your spouse. 

HSA Contribution Limits for 2023

For the year 2023, the HSA contribution limits were:

• Individuals: $3,850
• Families: $7,750
• 55 and older: Additional $1,000 catch-up contribution

If you’re trying to maximize your tax refund for 2023, you can still make contributions to your HSA account all the way up until April 15, 2024. 

Similar to the deadline to fund your IRA or Roth IRA each year, the deadline to fund your HSA account for the current tax year is your tax filing date for that tax year (usually on or about April 15th of the following year). Whether you file for an extension on your tax return has no effect on this deadline, so the tax filing date of April 15th is a hard deadline each year for all HSA account owners.  

The only contribution deadline that takes the tax filing due date for extensions (October 15th of the following year) into consideration is a business owner contributing to a SEP IRA. 

IRS Guidelines for 2024 HSA Contribution Limits

The IRS has released its guidelines for the 2024 HSA contribution limits, which have increased in comparison to 2023. The contribution limits are changed annually to adjust for inflation.  

The IRS announces that these contribution limits increase each fall, usually around the end of October, so HSA account owners can plan ahead for the next tax year.

IRS regulations require that contributions to an HSA must be made in cash. As a result, contributions of investment securities or other property are not allowed.

HSA Contribution Limits for Individuals and Families

Here’s a breakdown of the maximum amount you can contribute for the year 2024 and how they compare to 2023.  

These contribution limits are the maximum total amounts that you, your family members, or your employer can contribute collectively to your account in a year.  These new contribution limits are an increase of more than 7% over 2023’s contribution limits.  

HSA Contribution Limits for Individuals Over 55 in 2024

If you’re 55 years or older, the baseline 2024 HSA contribution limits listed above apply. However, you’ll be able to contribute an additional $1,000 to your account as a catch-up contribution.

The catch-up contribution limits remain the same in 2024 as they were in 2023. Making an additional contribution to your account can help you maximize your tax savings and provide an additional buffer in case of unexpected healthcare costs, especially as you get closer to retirement age.  

Contribution Limits for High Deductible Health Plans

If you’re enrolled in a High Deductible Health Plan (HDHP) on December 1 in a given year, you’ll be able to contribute the maximum amount you’re eligible for as per the “last month rule.”

You can contribute the maximum amount even if you’ve only been enrolled in an eligible plan for one day. However, you must stay enrolled for a one-year testing period. If you’re not enrolled in an eligible high-deductible health plan for one year (i.e., 12 calendar months), you may have to pay a 10% penalty and income tax on excess contributions.

Contribution Limits for HSA in 2024 With Employer Contribution

In some cases, your employer may contribute to your HSA as part of your benefits package at work. This employer contribution may be made as a matching contribution (based on how much the employee contributes) or as a set amount per employee each year.

The total annual 2024 HSA contribution limits set by the IRS refer to the total amount that can be contributed to any one person’s HSA account. This means that the total amount you and your employer each contribute throughout the year counts toward your limit for the year.

For example, if your employer contributes $1,000 annually to your HSA, you’ll only be able to contribute $3,150 to the account to avoid exceeding the $4,150 total contribution limit for 2024. No matter the source of the contribution, it all counts toward your annual contribution limit for each year. 

HSA Eligibility Requirements

Contributing to a health savings account can be a good tax and money management strategy. However, not everyone is eligible. To contribute to the account, you must be enrolled in an HSA-eligible high-deductible health plan (HDHP).

For 2024, these are the HDHP eligibility requirements:

• The minimum annual deductible for single coverage must be $1,600 or higher.
• The minimum deductible for family coverage must be $3,200 or higher.
• The maximum out-of-pocket expense limit is $8,050/year for self-only coverage.
• The maximum out-of-pocket expenses shouldn’t exceed $16,100/year for family coverage.

You’ll also need to meet a few additional conditions:

• You shouldn’t be enrolled in another healthcare plan that isn’t HSA-eligible.
• You shouldn’t be enrolled in Medicare. There is currently no plan offered under the U.S. Medicare system that qualifies as an HDHP.  Not even Medicare Advantage qualifies as an HSA-eligible plan.
• You shouldn’t be claimed as a dependent on anyone else’s tax return.

HSA Contribution Deadlines

In most cases, you can contribute to your HSA until the tax filing deadline. For example, you have until April 15, 2024, to contribute to your HSA for the tax year 2023.  As we’ve mentioned, filing for an extension on your tax returns does not extend this deadline.

HSA Tax Penalties

While HSAs offer valuable tax advantages, there are also many circumstances under which you may have to pay tax penalties, such as when you over-contribute or use the funds for ineligible expenses.

If you contribute more than the 2024 HSA contribution limit, for example, you may have to pay a 6% excise tax on the amount of your excess contribution for the year. The same tax penalty will apply for each year you fail to remove that extra contribution amount and any earnings on it from the account.

Excess contributions are considered taxable income, so if you fail to correct the mistake before the tax filing date, you may have to pay income tax on it.

You’ll also have to pay a tax penalty if you use HSA funds for ineligible expenses (this is referred to as “a non-qualified HSA withdrawal”). If you’re under the age of 65, the penalty is 20% of the non-qualified withdrawal, plus applicable income taxes. For those who are 65 or older, there’s no penalty, but you’ll still have to pay income taxes.

Should You Contribute the Maximum Amount to Your HSA?

Whether you should contribute the maximum amount to your HSA will depend on a number of factors. However, it may make sense in some situations:

• If you’re expecting a large amount of medical expenses in the future, it may be better to max out your HSA so you can use tax-advantaged money to pay for those expenses.
• If you have funds left over after maxing out your 401(k), you can max out your HSA for additional tax benefits and tax-free money to use for  future medical expenses.
• It's also a smart move to contribute the maximum amount if you want to reduce the amount of taxes you owe. Because you get a tax deduction on the amount you contribute to your HSA, you won’t pay income tax on your money for that year.
• Even if you are retired or temporarily unemployed, have no income at all, or have less than your contributions for the year, you can contribute to an HSA. This is the only tax-advantaged savings account that allows for this kind of flexibility when making contributions.

“If you’re approaching age 60 or older, regardless if you’re retired or still working, it’s always a good idea to max-out your contributions to your HSA account because once you’re enrolled in Medicare at age 65, you can still use the funds in your HSA account toward qualifying medical expenses, tax-free,” explains Brad Reichert, founder and managing director of Reichert Asset Management. 

“By maxing out their contributions each year, many HSA owners have accumulated tens of thousands of dollars in their accounts,” Reichert adds. 

“Since Medicare does not qualify as a high-deductible health plan, you cannot make contributions to an HSA account after age 65,” Reichert says. “However, that doesn’t mean you can’t use the money that’s left in your account toward eligible medical expenses to its fullest extent for the rest of your life. Being able to use these tax-advantaged dollars like this in retirement can help defray the effects of inflation on one of the largest expenses a retiree has during their golden years,” he shares.

Understand the 2024 HSA Contribution Limits To Maximize Tax Benefits

Contributing to your HSA up to the 2024 HSA contribution limit can help you put money aside for medical expenses when you’re older. Any unused amount you have in your account will roll over to the next year, unlike a Flexible Spending Account (FSA). However, it’s important to avoid overcontributions each year since you may have to pay steep penalties and income taxes on the excess.

You can use the money in your HSA to pay for many qualified medical expenses, such as some mental health services, dental care, hospital stays, medical office visits and lab tests, emergency room and urgent care visits, and other physician-prescribed treatments.

HSAs offer valuable tax advantages since any contributions you make to the account are excluded from taxable income. Earnings in the account grow tax-free, and distributions for qualifying expenses are tax-free. It is for this reason the Health Savings Account is considered a “triple tax-free” savings account!