Changes to Health Savings Accounts (HSAs) in 2025

Whether you’re considering opening a Health Savings Account (HSA) or have been enjoying the benefits for years, there are some upcoming changes to this account for 2025. Changes include an increase in how much you can contribute to your account for the year as well as what exactly qualifies for a high deductible health plan (HDHP), which is required to contribute to an HSA.

Health Savings Accounts in 2025

Here is what you need to know about HSAs in 2025:

Changes to how much you can contribute

• For an individual with self-only coverage under an HDHP, the annual contribution limitation is $4,300. This is an increase from the limit in 2024 of $4,150.
• For an individual with family coverage, the annual limitation is $8,550. This increased from the limit in 2024 of $8,300.
• The expected-benefit health reimbursement arrangement (the amount that your employer can contribute to your savings account) is $2,150 in 2025, up from $2,100 in 2024.

Changes to what defines a high deductible health care plan

• For 2025, an HDHP is defined as a health plan with an annual deductible that’s not less than $1,650 for self-only coverage or $3,300 for family coverage. 
• The annual out-of-pocket expenses, such as deductibles and copayments, don’t exceed $8,300 for self-only coverage or $16,600 for family coverage.

One item that didn’t change for 2025 is the catch-up amount for those ages 55 and older. For this group, you can contribute an additional $1,000.

What is an HSA and its benefits?

An HSA is a tax-advantaged savings account that you’re only eligible to contribute to if you’re enrolled in an HDHP. HSAs are considered triple-tax advantaged because:

• Contributions are tax-deductible if you contribute by paycheck deduction (meaning they’re not included in your annual gross income and aren’t subject to federal income taxes).
• Earnings on an HSA are tax-free if money is used for qualified healthcare expenses.
• Withdrawals are tax-free if used for qualified healthcare expenses. 

If, however, you withdraw funds for a non-qualifying expense, you will have to pay income taxes on the withdrawal and pay a 20 percent penalty. The IRS has a long list of what’s considered a qualifying expense for HSAs. Some examples of eligible expenses include medical copays, dental cleanings and exams, and eye exams. 

At age 65, if you use the money for non-qualifying expenses, you’ll still be taxed but don’t have to pay the penalty. This feature means some choose to use their HSA as a retirement tool.

Who is eligible for an HSA?

You are eligible for an HSA if you are:

• Covered under an HDHP
• Not covered by another health insurance plan, including a spouse’s plan
• Not enrolled in Medicare
• Not claimed as a dependent on someone else’s tax return 
• Not have other disqualifying medical coverage, such as a Flexible Spending Account (FSA) or other accounts
  
  Your employer may offer an HSA, but even if they don’t, you can still open an HSA as long as you meet the other requirements.

How does an HSA work?

Once you’re enrolled in a high deductible health care plan and meet the other qualifications above, you can open your HSA account. You can choose how much of the deposited funds to keep in cash to pay for expenses, such as a savings account, or you can choose to invest it if you don’t need to pay for expenses in the near future. If you change plans or enroll in Medicare, you can still use the money in the account – you’re just no longer able to contribute to it.

You’ll typically receive a debit card or checks to pay for qualifying medical expenses in that account. You may also keep your receipts and proper documentation and get a reimbursement down the road.

Bottom line

HSAs have benefits and limitations and may not be the best choice for everyone. If you have an HSA, it’s important to understand the latest changes, what qualifies as a medical expense and the best way to utilize your HSA.