The IRS has recently released Rev Proc 2024-25, 2024-22 IRB 1333, dated May 9, 2024, which outlines the inflation-adjusted contribution limits for Health Savings Accounts (HSAs) for the year 2025, as determined under Code Section 223. This annual adjustment is crucial for individuals and families who rely on HSAs to manage their healthcare expenses. Let’s delve into the details of these new limits and what they mean for you.
HSA Contribution Limits for 2025
For the calendar year 2025, the IRS has increased the annual contribution limits for Health Savings Accounts (HSAs):
- Self-Only Coverage: The annual deduction limit for individuals with self-only coverage under a high deductible health plan (HDHP) will be $4,300. This marks an increase of $150 from the previous limit.
- Family Coverage: For individuals with family coverage under an HDHP, the annual deduction limit will be $8,550, representing a $250 increase from the prior limit.
Definition of a High Deductible Health Plan (HDHP) for 2025
To qualify for HSA contributions, your health insurance plan must meet the IRS definition of a high deductible health plan (HDHP). For 2025, an HDHP is defined as follows:
- Self-Only Coverage: The plan must have an annual deductible of at least $1,650, and the annual out-of-pocket expenses (including deductibles, co-payments, and other amounts, but excluding premiums) must not exceed $8,300.
- Family Coverage: The plan must have an annual deductible of at least $3,300, and the annual out-of-pocket expenses must not exceed $16,600.
Excepted Benefit HRA Limits for 2025
For plan years beginning in 2025, the maximum amount that may be newly made available for the plan year for an excepted benefit Health Reimbursement Arrangement (HRA) is set at $2,150. Excepted benefit HRAs are designed to cover limited benefits, such as dental and vision care, which are not subject to the same requirements as traditional HRAs.
What These Changes Mean for HSA beneficiaries
These adjustments reflect the ongoing efforts to keep pace with inflation and the rising costs of healthcare. Here’s how you might be affected:
- Increased Savings Potential: With higher contribution limits, you can save more in your HSA, allowing you to better prepare for future healthcare expenses. This is especially beneficial for those who anticipate higher medical costs.
- Tax Benefits: Contributions to HSAs are tax-deductible, and the funds grow tax-free. Additionally, withdrawals for qualified medical expenses are also tax-free, providing a triple tax advantage.
- Planning for Out-of-Pocket Expenses: Understanding the new definitions of HDHPs and their associated out-of-pocket limits can help you choose the right health plan for your needs.
Staying informed about these changes can help you maximize the benefits of your HSA and make more informed decisions about your healthcare coverage. If you have any questions or need further assistance, consider consulting with a tax professional or financial advisor to make the most of your HSA contributions and benefits.
For additional details and tax advice, please contact Martin D. Hauptman at (973) 243-7912 or via email at mhauptman@mblawfirm.com