The short answer: As much as you're able to (within IRS contribution limits), if that's financially viable. If you're covered by an HSA-eligible health plan (or high-deductible health plan), the IRS allows you to put as much as $4,150 per year (in 2024) into your health savings account (HSA).
Look ahead and estimate your healthcare costs for the upcoming year, including medical, dental, vision, prescriptions, and even over-the-counter medications. Along with money to help manage your deductible, you'll also want enough saved to cover some of these expected HSA-qualified expenses.
Still, despite workers spending more on health care in 2022 than in previous years, average balances in HSAs increased, rising from $4,318 in 2021 to $4,607.
Pre-tax contribution:
The earnings in the account aren't taxed. Contributions made toward your HSA through payroll deductions are excluded from your gross income. In addition, contributions made to your HSA by your employer may be excluded from your employment taxes (like Social Security and Medicare taxes).
The correlation between generous HSA contributions and increased enrollment in high-deductible health plans was significant across different industries and regions, with the exception of California, which had the most generous HSA contributions ($808 for singles and $1,316 for families) yet the lowest enrollment in ...
If you're unsure of where to start, try working with a financial advisor. What Is the Average HSA Balance By Age? The average HSA balance for a family is about $7,500 and for individuals it is about $4,300. This average jumps up to $12,000 for families who invest in HSAs.
Contribute at least the amount of your deductible
You'll be responsible for paying for health care expenses out of pocket until your annual deductible is met, so consider contributing at least the amount of your deductible to your HSA.
Contribute the maximum amount: Since the money in your HSA does not expire, it's a good idea to contribute as much as you can each year. The HSA contribution limit for 2024 is $4,150 for individuals and $8,300 for family coverage.
After maxing HSA contributions, then contribute additional money to a 401(k). Maxing contributions to both your HSA and retirement accounts should help you build a nest egg your future self will appreciate.
If you're able to make the maximum contribution each year, then it's suggested that you do so. Some years you may need to use more of your HSA contributions than other years. Just remember, there's no yearly minimum you have to spend from your HSA and your entire HSA automatically rolls over each year.
Yes, you can use a health savings account (HSA) or flexible spending account (FSA) for dental expenses.
One of the biggest advantages of an HSA is that it offers a triple tax advantage, which means: Contributions to an HSA are federally tax-deductible, reducing your taxable income. Depending on where you live, you may also get a break on state income taxes. Assets in an HSA can potentially grow federal tax-free.
What happens if I contribute to my HSA more than the maximum annual limit that the IRS allows? HSA contributions in excess of the IRS annual contribution limits ($3,600 for individual coverage and $7,200 for family coverage for 2021) are not tax deductible and are generally subject to a 6% excise tax.
How can you lower your taxable income with an HSA? Contributions to your HSA are tax-deductible, and the funds are tax-free when used for qualified medical expenses. For example, if you contribute $2,000 annually to your HSA and your base salary is $30,000- you will only be taxed on $28,000 come tax season.
You should receive Form 5498-SA from the trustee of your HSA. This form will show your contribution amount. You'll need to contact the trustee of your HSA if you cannot find this form.
For a single person who puts the annual maximum of $4,300 into their HSA, the tax savings would typically be between $860 and $1,505 annually. A family could save almost $3,000 per year on income taxes if they contribute the maximum amount of $8,550 and have a tax rate of 35%.
If you can receive benefits before that deductible is met, you aren't an eligible individual. Other employee health plans. An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses can't generally make contributions to an HSA. FSAs and HRAs are discussed later.
Because HSAs come with several tax benefits that could save you money, you may want to consider contributing as much as you can to your HSA.
Contributions below the maximum: Relative to 2022, average HSA contributions increased. Average individual contributions rose to $1,962, while the average employer contribution decreased slightly to $762.
Unlike many flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs), unused HSA funds automatically carry over to the following year. Even if your employer provided the account and made contributions, the account belongs to you — so any remaining funds are carried over every year.
Contributing the maximum annual contribution and investing for the long term is the best way to get the most benefit from your HSA. Avoid using the HSA as your emergency fund because nonqualified withdrawals are subject to ordinary taxes and possibly penalties.
What Is the Average HSA Balance By Age? The average HSA balance for a family is about $7,500 and for individuals it is about $4,300. This average jumps up to $12,000 for families who invest in HSAs. Here's a breakdown of the average HSA balance by age.
Can I change my contribution amount during the year? Yes. You can change your contribution to your HSA at any time, but no more than once a month. To change your pretax payroll deduction amount, contact your employer.
To qualify for an HSA, the out-of-pocket max for your health insurance must be $8,050 or less for individuals, and $16,100 or less for families. It's not uncommon to find a high-deductible plan with a larger out-of-pocket max, but that will make you ineligible for an HSA.