Here are the contribution limits for health savings accounts in 2024

The annual contribution limit for health savings accounts (HSAs) will soon be raised significantly due to inflation, according to the IRS announced this week.

For 2024, the annual cap for self-only HSA plans will increase to $4,150 from $3,850 in 2023, and the cap for family plans will increase from $7,750 to $8,300 . The catch-up contribution for savers age 55 and older remains at $1,000 each, raising the total deposit limit for older savers to $10,300.

It’s a “significant increase” compared to historical HSA inflation adjustments, according to Ashton Lawrence, a board-certified financial planner and a director at Mariner Wealth Advisors in Greenville, South Carolina.

Prior to 2022, the average annual increase in the HSA contribution limit was about 1.6% per year, Lawrence said, and the jump from 2023 to 2024 for self-only and family plans will be about 8% and 7%, respectively. “It’s extremely beneficial for customers,” he added.

To be eligible for HSA contributions, you must have high-deductible health insurance. Qualifying plans require a minimum deductible of $1,600 for self-insurance or $3,200 for a 2024 family plan, according to the IRS.

But those who meet the requirements may not fully understand how the accounts work. “Clients often overlook the investment and tax planning benefits of an HSA,” said Judy Brown, CFP and principal financial advisor at SC&H Group in the Washington and Baltimore area. In addition, she is a certified public accountant.

Health savings accounts offer three tax advantages:

1. There is a withholding tax on contributions that allows you to claim the tax credit even if you don’t state the deductions individually. And you can contribute until the tax deadline, which means you can make contributions in 2024 until the due date in 2025.
2. not how You can withdraw tax-free at any time from pre-tax individual retirement accounts or 401(k) plans, which may also offer an upfront tax benefit qualified medical expenses.
3. You can also grow the account tax-free by investing, which can become a “retirement nest egg for medical expenses,” Brown said. But most Americans don’t use HSAs for this purpose. According to a study, about 62% of account holders spend money on annual or short-term expenses April 2023 report from the Employee Benefit Research Institute.

“The HSA is an excellent option to do something the IRS rarely allows, which is eat your pie and eat it too,” said Jim DeGaetano, a CFP and founder of Diamond, of the initial tax break and future tax-free Withdraw Wealth Advisor in Carlisle, Pennsylvania. He is also an auditor.