Is the amount I can contribute to an HSA before taxes limited each year?

Yes, the amount you can contribute to an HSA (Health Savings Account) before taxes is limited each year. HSAs are tax-advantaged accounts that allow individuals to save for medical expenses while enjoying potential tax benefits. The IRS sets limits on the maximum annual contributions to HSAs to ensure they are used primarily for health-related purposes.

For 2021, the annual contribution limits for HSAs are $3,600 for individuals and $7,200 for families. These limits include both employee and employer contributions. If you are 55 or older, you can make an additional catch-up contribution of $1,000 per year. It's important to stay informed about any changes in these limits as they are adjusted for inflation.

Contributions to an HSA are typically made on a pre-tax basis, which means the money is deducted from your paycheck before taxes are withheld. This can help reduce your taxable income and lower your overall tax liability. Any contributions made by your employer are also excluded from your taxable income.

Keep in mind that if you exceed the annual contribution limits set by the IRS, you may be subject to additional taxes and penalties. It's essential to track your contributions throughout the year to avoid over-contributing to your HSA.

Absolutely! The IRS imposes annual limits on HSA contributions to maintain their purpose as a savings vehicle for health expenses. For the year 2023, the contribution limits are $3,850 for individual coverage and $7,750 for family coverage. Remember, if you're 55 or older, you can also contribute an additional $1,000 to build your savings even further.