Understanding the Limits of an HSA: A Comprehensive Guide

Health Savings Accounts (HSAs) are a valuable tool for saving money on healthcare expenses, but it's essential to understand the limits that come with them. HSAs come with specific contribution limits that can change annually. As of 2021, the contribution limits are $3,600 for individuals and $7,200 for families. These limits include both your contributions and any contributions made by your employer.

Additionally, there are limits on who can contribute to an HSA. To contribute to an HSA, you must be enrolled in a high-deductible health plan (HDHP) and cannot be covered by any other health insurance plan that is not an HDHP. You also cannot be enrolled in Medicare or claimed as a dependent on someone else's tax return if you want to contribute to an HSA.

It's important to note that HSA funds can only be used for qualified medical expenses. Using HSA funds for non-qualified expenses can result in penalties. However, once you reach the age of 65, you can use HSA funds for non-medical expenses without penalty, though regular income tax would apply.

Health Savings Accounts (HSAs) are not only a fantastic way to save for medical expenses but understanding their contribution limits is crucial for maximizing their benefits. As of 2023, the contribution limits have increased to $3,850 for individuals and $7,750 for families, allowing you to set aside even more for your healthcare needs.