Health Savings Account Limits for 2025 Announced
The IRS has provided inflation-adjusted numbers for 2025 Health Savings Accounts (HSA). The maximum contribution for those with eligible plans is $4,300 for self-only coverage ($150 increase over 2024) and $8,550 for those with family coverage ($250 increase over 2024). The $1,000 catch-up contribution for those age 55 and older remains unchanged.
To qualify for an HSA account, an individual or family must have a high deductible health plan (HDHP). For 2025, a qualifying HDHP must have an annual deductible of $1,650 for self-only coverage or $3,300 for family coverage. In addition, annual out-of-pocket expense limits may not be more than $8,300 for self-only coverage and $16,600 for family coverage.
Take advantage of tax-free growth
HSAs remain an underutilized tool for producers. As self-employed individuals, farmers routinely pay $20,000 – $30,000 for family health coverage that often includes large deductibles and maximum out-of-pocket expenses. In fact, the deductibles are often in excess of the required out-of-pocket numbers mentioned above.
Health Savings Accounts allow for pre-tax contributions and tax-free growth of contributions. For producers that file a Schedule F, an HSA is a simple and cost-effective way to receive a deduction for medical costs beyond health insurance premiums.
Most Schedule F farmers can’t deduct medical expenses because they don’t meet the thresholds for itemizing deductions. By contributing to a health savings account, you get the benefit of the expenses through your income tax return regardless of hurdles. Then you can choose to pay your medical expenses from the account or just let it grow.
HSAs can be beneficial at any age
Don’t believe you’re too young to start one of these either — they are important tools for building reserves for young healthy families as well (think orthodontist). Once an individual is eligible for Medicare they can no longer make contributions, but don’t use that as an excuse to not contribute as you approach Medicare age. There is no issue with maintaining a balance in the account post age 65. It can continue to be used to pay medical expenses or can be used to pay things like Medicare and long-term care insurance premiums (two of the few types of health insurance for which an HSA can be used).
At retirement age, the HSA can become an additional source of retirement income if not used for medical expenses. At age 65, withdrawals can be made penalty free even for non-medical expenses. The withdrawals are taxed at ordinary rates, similar to an IRA withdrawal.
Get some tax benefit from your health care dollars. An HSA is a great tool to keep your cash in your own pocket and invested, while saving for future expenses.
Kelly Jackson Hardy is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers, privately-held elevators and supply dealers, and cooperatives. Kelly is a principal with CliftonLarsonAllen in Princeton, Illinois, as well as a regular speaker at tax and estate planning seminars. Kelly was raised on a hog, row crop and cattle farm in central Illinois and has been involved in the ag industry her entire life. Kelly, her husband, and two sons are active in 4-H and operate a small feeder calf operation and pumpkin business.
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