Health Savings Account Contribution Limit

Health savings accounts (HSAs) are an increasingly popular method for buying affordable, portable health care coverage. HSAs offer a variety of tax benefits, but are subject to contribution limits established by the IRS. The IRS adjusts the maximum allowable contribution level each year.

Function

Persons who have health savings accounts (HSAs) contribute annually to these accounts to save for anticipated medical expenses. Individuals and employers can contribute to these accounts, subject to annual limits.

Considerations

The limit on HSA contributions depends on the type of high-deductible health plan (HDHP) coverage a person has. A person must be covered under an HDHP to qualify for a health savings account.

Limits

For 2008, a person with self-only HDHP coverage may contribute up to $2,900 to a health savings account. A person with family HDHP coverage may contribute up to $5,800. In 2009, the limits will be $3,000 (self-only) and $5,950 (family). These limits apply to individual and employer contributions.

Benefits

Individual and other non-employer contributions to HSAs are tax-deductible, even if a person does not itemize deductions. An added benefit is that interest and other earnings on HSA contributions are tax-free.

Warning

Contributions to an HSA must end once a person enrolls in Medicare. However, that person can still withdraw money in the account tax-free for medical expenses.