2025 HSA limit increase announced

The IRS has released the 2025 adjusted limits for health savings accounts (HSAs), high-deductible health plans (HDHPs) and excepted benefit health reimbursement arrangements (EBHRAs). The 2025 increases fall significantly below the giant limit increases made from the 2023 to 2024 plan years.

Still, employees will be able to put more money into their HSAs in 2025, largely in part to rising inflation. The annual limit for HSAs was increased to $4,300 for self-only coverage and $8,550 for family coverage, up from $4,150 for self-only coverage and $8,300 for family coverage in 2024.

The IRS also released 2025 deductible and out-of-pocket expense guidance for HDHPs. An HDHP for self-only coverage must have an annual deductible of no less than $1,650 for self-only coverage or $3,300 for family coverage. Annual out-of-pocket expenses cannot exceed $8,300 for self-only coverage and $16,600 for family coverage. These are both up from $1,600 for self-only coverage and $3,200 for family coverage in 2024.

For EBHRAs, the maximum amount that may be made newly available for plan years beginning in 2025 is $2,150, a small jump from $2,100 in 2024.

Benefits of an HSA

These increases come as enrollment into HSA programs continues to grow, and as more and more employers offer contributions to their employees’ accounts. HSAs are an easy and smart way for employees to save for medical expenses, even in their retirement years. They allow for increased flexibility to prepare for the unexpected and help lessen rising healthcare costs, as well.

Beyond that, there is an additional hidden value, too – a triple tax benefit. There is a tax deduction going in, a tax exclusion on the amounts of income earned in the account and a tax exclusion on the amount of the distributions for qualified health expenses. Even better, HSAs are not tied to employment – so the money is yours and stays yours no matter where you’re working or have retired from.

HSAs have fantastic potential regarding retirement planning, too. Amounts contributed to an HSA earn income on a tax-free basis like an IRA, but unlike an IRA, the amounts distributed after retirement in an HSA would be received tax-free, as long as the expenses are qualified medical expenses. Since there is no expiration date for money to be used from an HSA either, they are generally a great tool to help people keep more of their money to pay medical expenses now or later -- just save your receipts!

Helping you save now, for tomorrow

Baker Tilly Vantagen offers a full-service suite of benefits administration and human resources solutions that both employers and their employees can count on. Our platform, tools and services were all designed with you in mind, and we make it easy for both employers and employees to navigate healthcare spending and savings accounts. We offer customizable options across a variety of accounts and our industry-leading HSA investment rates mean that your employees can reap the benefits of having an administrator that is focused on them for the long term.