HSA Contribution Limits

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What are HSA contribution limits?

Health savings account contribution limits or HSA contributions limits refer to the maximum amount or ceiling amount that you can contribute to a health savings account (HSA) per year. 

A health savings account or HSA is a type of savings account that is specifically used for qualified medical expenses. It can only be used by an employee if they also have a high-deductible health plan (HDHP). If you are wondering how an HSA is funded, an employee contributes pre-tax dollars to an HSA each pay period. 

With an HSA, you are not required to use the funds by the end of the year. You can choose to save the funds in an HSA or use it for qualified medical expenses. It is fully funded and owned by the employee. However, employers can also contribute to the fund if they want to. 

Also, what’s great about an HSA is that it is not a “use it or lose it” account. Meaning, your money will not go away if you do not use it by the end of the year. If you change employers, you also get to keep your HSA. 

What are the current HSA contribution limits? 

For 2021, the HSA contribution limit for individuals is $3,600 and $7,200 for family coverage per year. Keep in mind that eligible individuals who are age 55 years or older are allowed a catch-up contribution of up to $1,000. 

It is important to be mindful of the yearly contribution limit. This is because you might be causing yourself more harm than good if you exceed the limit. The excess amount will be subject to income tax and a 6% excise tax at the end of the year. 

The Internal Revenue Service (IRS) takes charge of setting the contribution limits and making necessary adjustments for inflation. The limits have changed numerous times. If you are planning to set up an HSA, be sure to check for the updated contribution limits.

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