For those of you who want the quick answer: the HSA contribution limits for 2019 are $3,500 for an individual and $7,000 for a family. If you are 55 or older your catch-up contributions are limited to an extra $1,000 a year.

For 2020, the annual limit on deductible contributions is $3,550 for individuals with self-only coverage under an HDHP (a $50 increase from 2019) and $7,100 for family coverage (a $100 increase from 2019).

If you are a bit confused about what an HSA is, it stands for Health Savings Account. It’s a tax-free savings account you can open to help you pay for qualified medical expenses.

If you don’t spend it, you can withdraw your savings and investments when you retire tax-free, like a Roth IRA.

To be able to open an HSA, your health plan has to meet the IRS criteria for a high-deductible health plan (HDHP). More on that below.

Read on to find out how an HSA works and the criteria you have to fulfill to be able to have one.

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How HSAs Work

If you go through your employer and choose a high deductible health insurance plan, you might be eligible for an HSA. Here you and your employer contribute to the savings account, before payroll tax kicks in, until you hit the annual contribution limit.

Your HSA is there to help you pay for out-of-pocket medical expenses, whether that be dental care or prescription medicine. You can find examples of what you can and can’t spend your HSA on in IRS publication 502.

You can also use your HSA to help you pay for your annual deductible. We talk a bit more on how that works here.

You and your employer both contribute to your HSA. If you leave your job, you can take your HSA with you to your new job. This is different from a Health Reimbursement Arrangement (HRA) which has the same purpose, but only your employer contributes and its owned by your employer.

An HSA has several tax advantages (which we talk more about here). It’s 100% tax deductible from your gross income, meaning that your tax burden could be lower come tax season.

Changes to the HSA Contribution Limits

The IRS announced the annual HSA contributions for 2019 as part of the release of Revenue Procedure 2018-30.

Self Only Coverage Family Coverage HSA Contribution Limit (for both you and your employer) $3,500 $7,000 HSA catch-up contributions (if you’re 55+) $1,000 $,1000

If you go over the annual limits, the Internal Revenue Service may charge you a 6% excise tax on these excess contributions. This tax applies every year the excess contribution remains in the account.

The IRS announced the annual HSA contributions for 2020.

Self Only Coverage Family Coverage HSA Contribution Limit (for both you and your employer) $3,550 $7,100 HSA catch-up contributions (if you’re 55+) $1,000 $,1000

The limits on annual deductibles are also subject to annual inflation adjustments. For 2020, the lower limit on the annual deductible for an HDHP is $1,400 for self-only coverage and $2,800 for family coverage, both increased from 2019. The upper limit for out-of-pocket expenses is $6,900 for self-only coverage and $13,800 for family coverage, both increased from 2019.

Changes to the HDHP Guidelines

To be an eligible individual for an HSA, your health care plan must be what the IRS calls an HDHP plan, a high-deductible healthcare plan.

To qualify as an HDHP the annual out-of-pocket expenses and the minimum deductibles have to agree with the IRS guidelines. Additionally, the plan has to offer no benefits before you hit your deductible. So if it helps to pay for an X-ray or a specialist visit before you hit your deductible, it won’t be HSA eligible.

Here are what they are for 2020 and how they compare to 2019.

2020 2019 Change HDHP minimum deductible for individuals $1,400 $1,350 +$50 HDHP minimum deductible for families $2,800 $2,700 +$100 HDHP maximum out-of-pocket for individuals $6,900 $6,750 +$150 HDHP maximum out-of-pocket for families $13,800 $13,350 +$250

Alternatives to HSAs

In this increasing era of consumer-driven healthcare, HSAs are just one way you can save for your healthcare costs. You can learn more about flexible spending accounts (FSA) and how they compare with HSAs here.

You can also compare the advantages and trade-offs for traditional low-deductible plans versus high deductible plans here.

Frequently Asked Questions

Q) What are the HSA contribution limits for 2020?

The limits on annual deductibles are also subject to annual inflation adjustments. For 2020, the lower limit on the annual deductible for an HDHP is $1,400 for self-only coverage and $2,800 for family coverage, both increased from 2019. The upper limit for out-of-pocket expenses is $6,900 for self-only coverage and $13,800 for family coverage, both increased from 2019

Q) What are the HSA contribution limits for 2018?

In 2018, the annual individual HSA contribution limits are $3,450 and $6,900 for families. If you’re 55 or older you can make an annual maximum of $1,000 in HSA catch-up contributions.

Q) How much can you contribute to an HSA in 2019?

$3,500 as an individual, $7,000 as a family. $1,000 catch-up contributions if you’re 55 and over.

Q) What is the minimum deductible for an HSA eligible HDHP plan in 2018?

For individuals, the HDHP annual minimum deductible was $1,350. For families, it was $2,700.

Q) Do my employers match contribution count towards my HSA limit?

Yes. Contributions from you, your employer, or your family count towards your limit.

Q) What is the maximum age to contribute to an HSA?

You can contribute to an HSA even after the age of 65. As long as:

You aren’t enrolled in Medicare

You’re eligible for an HSA.

You can also use the $1,000 catch-up contributions that kick in after 55.

Q) Can I contribute to an HSA for 2018 in 2019?

No. HSAs work by tax year. So, the contributions made in the 2018 tax year are different from the ones in the 2019 tax year.

Once that tax year passes, you can no longer make contributions to that HSA for that tax year.

But, the IRS does allow you to make prior year contributions to your HSA. For a few months in the following tax year, you can make a contribution but you need to mark it as one for the previous year. It’s not a simple process and you will need to notify your HSA custodian, so get in touch with them. The deadline for prior year contributions is the day your taxes are due (usually mid-April).

Q) Can my spouse and I both have an HSA?

You and your spouse cannot have a joint HSA. But you can each open your own separate HSAs (as long as you are eligible). This is the case even if you’re both covered by the same HDHP.

But there’s a catch. The IRS will treat you both as a “single unit”. This means both your HSA contributions will need to be under the “family” limit. This was $7,000 in 2018.

The IRS doesn’t need the contributions to be split evenly. You can, for instance, put all the contributions in the husband’s HSA, with nothing going to the wife’s HSA.

Married couples can use their HSA to cover the qualified expenses of the other spouse.

(Morbid tone coming up) If your spouse dies, the HSA will become yours if you are the designated beneficiary of it.

Q) Do employers match HSA contributions?

Yes. But you will need to find out from your employer how much they match your contributions. They may match all, some, or none.

Contributions from both of you must be under the HSA contribution limits. This is $3,500 for individuals, $7,000 for families in 2019.

In 2013 surveys found that the average annual contributions from employers were:

For employers with more than 500 employees, $750 for individuals, $1200 for employees with family plans.

For employers with more than 500 employees, $500 for individuals, $1000 for employees with families.

Sadly, there doesn’t seem to be more recent data on the topic.

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Because of the tax savings an HSA offer, between you and your employer it’s best to contribute as much as the annual limits allow.