There are different strategies for making your Health Savings Account (HSA) work for you. Some people like to use their HSA to spend on healthcare expenses as they incur them, saving money in the short term by paying for healthcare pre-tax. Others like to maximize their HSA contributions every year and save (and invest) that money long term to save on healthcare during retirement. No matter how you use your HSA, it’s important to understand how much you can contribute each year, and the different ways you can make those contributions.

If you’re still getting up to speed on the basics of HSAs, we recommend learning what an HSA is and how it works first.

What are the 2023 HSA Contribution Limits?

The IRS determines annual HSA contribution limits, and they can change every year. Staying up to date on annual contribution limits will ensure you don't over-contribute to your HSA. If you do go over the contribution limit and don’t correct it before you file your taxes, you’ll have to pay a 6% tax on your excess contributions, called an “excise tax.”

In 2023, the IRS increased the self-only contribution limit by $200 to $3,850 and the family contribution limit by $450 to $7,750.

These amounts only apply to HSA account owners who were eligible to contribute to their HSA for the entire calendar year. If there were months that you were ineligible for your HSA, then you have to prorate your contribution limit based on the number of months you were eligible. For example, if you have a self-only HSA and were eligible to contribute to your HSA for 8 months of 2023, you would be able to contribute [8 * ($3,850/12) = $2,566.67].

To be eligible to make family contributions to an HSA, you must be enrolled in a high deductible health plan (HDHP) with family coverage. Each HSA is actually owned by one person, but if you have family coverage under an eligible HDHP, then you’re able to pay for qualifying medical expenses for the people who are covered by your health plan. Learn more about HDHPs and HSA eligibility in this post.

Because HSAs are complicated, there are some exceptions. The person can’t have other health coverage that makes them ineligible, and they can’t be claimed on another person’s tax return.

What are “catch-up contributions” and how do they work?

HSA account owners who are over 55 can make “catch-up contributions,” which are intended to help people save more as they prepare for retirement. Catch-up contributions can only be made for the HSA account owner themself, so there can only be one catch-up contribution applied per year per HSA account. In 2023, the catch-up contribution amount is $1,000. If you turn 55 during the middle of a year, the IRS considers you 55 for the entire calendar year. However, if you’re ineligible to contribute to your HSA during some months, you must prorate your catch-up contribution the same way you prorated your overall contribution.

HSA Contribution Limits for Married Couples

Married couples only need one HSA account to cover both of their qualified medical expenses. However, there can be a lot of nuance to HSA contributions for spouses. We’ll run through some of those scenarios here.

If each person in the couple has an HDHP with self-only coverage, then they have to open two separate self-only HSAs. Each of their own contributions are limited to self-only ($3,850), which adds up to just $50 shy of the family contribution limit for 2023 ($7,750).

If both spouses are 55 or older, they need to each have their own HSAs if they both want to make catch-up contributions. If they have a family HSA, only the account holder would be able to make a catch-up contribution up to $1000.

If one spouse has family coverage, they’re considered to both have family coverage, so they only need one HSA. As a couple, they would save money on account fees (assuming their employers aren't covering the fees).

If one spouse has family coverage and the other spouse is not HSA-eligible because they are on Medicare or other non-qualified insurance, the spouse with the HSA can still contribute the full family limit, $7,750. One spouse’s ineligibility does not cancel out the other’s eligibility.

Finally, there’s a special rule for domestic partners. Since they aren’t married, they’re not limited by the combined family contribution limit. If they’re both covered on a policy that gives them family coverage, each of them can open a family HSA and contribute $7,750 for a total of $15,500.

Who can contribute to my HSA?

One of the biggest differences between HSAs and other tax-advantaged accounts like HRAs and FSAs is that anyone can fund the account. That means that you, your employer, and anyone else can make contributions to your HSA. Regardless of who makes the contributions, the HSA account holder gets the tax benefits associated with those contributions.

How can I contribute to my HSA?

HSAs also have more flexible funding sources than FSAs and HRAs. In addition to payroll deductions and employer-contributed funds, HSA contributions can be made via direct deposit and cash to an individual’s HSA bank account. With an HSA, you’re also not locked into a monthly election. If you’re contributing via payroll deduction, you can change your monthly contribution at any time.

What are the HSA contribution deadlines?

Even after the calendar year ends, you have extra time to make contributions to your HSA to hit your limit. The HSA contribution deadline is whatever is earlier, April 15th of the following year or the date you file your personal income tax return. There are no extensions.

If you were only HSA eligible for a portion of the year, you have to prorate your contribution, even if you’re contributing after the calendar year ends. For example, if you have a self-only HSA and you were eligible for the first 8 months of the year, you can contribute 8/12 of the annual contribution limit ($2,567) up until April 15th (or when you file your taxes, if it’s before then).

Make the most of your HSA by contributing the annual limit

At Thatch, we believe HSAs are the most effective way to save for future healthcare expenses. Since the funds in your HSA are yours forever, we recommend contributing as much as you feel comfortable with, up to the annual limit, so you can save for healthcare over time. If you have a Thatch HSA and want to discuss your contribution strategy, get in touch.