Taxes 2025 – Health Savings Account Contribution-Deductible

Health Savings Account (HAS)

According to the IRS, a Health Savings Account (HSA) contribution refers to the amount of money that an individual or their employer can deposit into an HSA (a tax-exempt trust or custodial account set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur) annually. These contributions are subject to annual limits set by the IRS and are designed to help individuals save for qualified medical expenses. Contributions are tax-deductible, grow tax-free, and can be withdrawn tax-free for eligible healthcare costs as described in IRS Publication 969.

Health Savings Account (HAS) Contribution Deduction

HSA contribution deductions allow taxpayers to reduce their taxable income by the amount they contribute to a Health Savings Account (HSA). Contributions to an HSA are tax-deductible, even if the taxpayer does not itemize deductions. This deduction applies to contributions made with post-tax dollars (money that remains after taxes have been deducted from your earnings or income,) while pre-tax contributions (payments made to accounts or benefits directly from gross income—before any taxes are deducted) through payroll deductions are already excluded from taxable income.

2025/2025 Health Savings Account (HSA) Deductibles

HSA contribution limits represent the maximum amount that is tax-deductible in a given tax year. Note, contributors are allowed to deposit more than these limits into their HSA. The excess amount, however, is not tax-deductible and may incur a 6% excise tax unless it is withdrawn before the tax filing deadline for that year. 

For the 2024/2025 tax season, the IRS allows up to $4,300 for self-only coverage, up to $8,550 for family coverage, and an additional $1,000 for individuals aged 55 and over. In contrast, for the prior tax season, 2023/2024, the IRS allowed up to $4,150 for self-only coverage, $8,300 for family coverage, whilst the additional for individuals above 55 years was $1,000. The key difference, adjustments reflecting inflation and aimed to help taxpayers save more for healthcare, from 2023/2024 to 2024/2025 was an increase of $150 for self-only coverage, an increase of $250 for family coverage, with the catch-up contribution remaining the same.

Example Tax Deduction Calculations For Health Savings Account (HSA)

As an example, an HSA contributor who earns an annual income of $50,000 and makes HSA contributions of $4,300 (2024/2025 limit for self-only coverage). The contributor’s taxable income would be lower after deducting his HAS contributions from his annual income: $47,500 ($50,000 – $4,300.)

Again, the deduction is particularly beneficial as it reduces current tax liability while allowing the taxpayer to save for future medical expenses with tax-free withdrawals. 

Conclusion

The IRS allows tax-deductible Health Savings Account (HSA) contributions annually. For 2024/2025, the limits are $4,300 for self-only and $8,550 for family coverage, with an extra $1,000 for those aged 55+. These limits rose from 2023/2024 due to inflation adjustments: $150 more for self-only and $250 for family coverage, while catch-up contributions remain unchanged. HSA contributions reduce taxable income, even without itemizing deductions, benefiting taxpayers while saving for medical expenses.

Notes

• A High-Deductible Health Plan (HDHP) is a type of health insurance plan characterized by lower premiums and higher deductibles compared to traditional plans. It’s often paired with a Health Savings Account (HAS).
• HDHPs are ideal for individuals or families who are: generally healthy and require minimal healthcare; interested in saving for future medical expenses through an HSA; and are comfortable with the higher out-of-pocket costs in exchange for lower premiums.
• The minimum HSA contribution deductible for self-only coverage increased by $50.
• The minimum HSA contribution deductible for family coverage increased by $100.
• 12 prominent Health Savings Account (HSA) providers, including banks, insurance companies, and specialized HSA administrators:

1. Fidelity Investments – Known for no fees and robust investment options.
2. Lively – Offers user-friendly platforms and no account fees.
3. HealthEquity – A leading HSA provider with strong employer partnerships.
4. Optum Bank – Backed by UnitedHealth Group, offering comprehensive HSA services.
5. HSA Bank – Specializes in HSAs with flexible spending and investment options.
6. Bank of America – Provides HSAs with integrated banking and investment features.
7. Wells Fargo – Offers HSAs with a focus on convenience and accessibility.
8. UMB Bank – Known for its strong customer service and investment options.
9. The HSA Authority (Old National Bank) – Offers competitive rates and investment opportunities.
10. Saturna Capital – Focuses on investment-oriented HSAs.
11. Further (formerly SelectAccount) – Provides HSAs with a range of spending and saving tools.
12. BenefitWallet – A comprehensive HSA platform for individuals and employers.

Other Sources

Plan Details

NEW HSA Deduction: PAY LESS TAXES, Write-off Health Expenses, and TAX-FREE Wealth! [HSA Explained]: https://youtu.be/ufkIUC_raR8

What is a Health Savings Account? HSA Explained for Dummies: https://youtu.be/sii1kX7awFQ

How does a health insurance Deductible work? https://youtu.be/yc9Aa1uBkGA

How to Complete IRS Form 8889 for Health Savings Accounts (HSA): https://youtu.be/f0ldHvce_24

About Form 8889, Health Savings Accounts (HSAs): https://www.irs.gov/forms-pubs/about-form-8889

Legislation and Regulations

Section 223 – Health Savings Accounts: https://www.irs.gov/pub/irs-drop/n-13-57.pdf

AMERICAN RELIEF ACT, 2025: https://www.congress.gov/bill/118th-congress/house-bill/10545/text

“Patient Protection and Affordable Care Act”: https://www.congress.gov/111/plaws/publ148/PLAW-111publ148.pdf

Health Savings Accounts and Other Tax-Favored Health Plans: https://www.irs.gov/pub/irs-pdf/p969.pdf

Rev. Proc. 2024-25: https://www.irs.gov/pub/irs-drop/rp-24-25.pdf

“Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act”: https://www.congress.gov/116/bills/s3548/BILLS-116s3548is.pdf