Health Savings Account (HSA) Limits

Tax Tips

Health Savings Account Limits for 2021

Annually adjusted contribution limits and other requirements must be met if you're covering health care costs with an HSA.

Getty Images

For many people, health savings accounts (HSAs) offer a tax-friendly way to pay medical bills. You can deduct your contributions to an HSA (even if you don't itemize), contributions made by your employer are excluded from gross income, earnings are tax free and distributions aren't taxed if you use them to pay qualified medical expenses. Plus, you can hold on to the account past your working years and use it tax-free for medical expenses in retirement. All-in-all, HSAs can be a great tool for covering your health care costs.

Get Tax Tips: Sign up for Kiplinger's free Tax Tips e-newsletter to trim your taxes

There are, however, a few HSA limitations and requirements that are adjusted for inflation each year. They apply to the minimum deductible for your health insurance plan, your annual out-of-pocket expenses and the amount you can contribute to an HSA for the year. If you're not in compliance with the restrictions in place for any particular year, then you can say goodbye to the HSA tax savings for that year.

Sponsored Content

SEE ALSO: 10 Myths About Health Savings Accounts

Minimum Deductibles

To contribute to an HSA, you must be covered under a high deductible health plan. For 2021, the health plan must have a deductible of at least $1,400 for self-only coverage or $2,800 for family coverage. (These are the same minimum deductibles required for 2020.)

SEE ALSO: Tapping the Power of a Health Savings Account

Out-of-Pocket Expenses

The health plan must also have a limit on out-of-pocket medical expenses that you are required to pay. Out-of-pocket expenses include deductibles, copayments and other amounts, but don't include premiums. For 2021, the out-of-pocket limit for self-only coverage is $7,000 ($6,900 for 2020) or $14,000 for family coverage ($13,800 in 2020). According to the IRS, only deductibles and expenses for services within the health plan's network should be used to determine if the limit applies.

Advertisement

SEE ALSO: HSA Investing When You're Over 65

Contribution Limits

Finally, your contributions to an HSA are limited each year, too. You can contribute up to $3,600 in 2021 if you have self-only coverage or up to $7,200 for family coverage ($3,550 and $7,100, respectively, for 2020). If you're 55 or older at the end of the year, you can contribute an extra $1,000. However, your contribution limit is reduced by the amount of any contributions made by your employer that are excludable from your income, including amounts contributed to your HSA account through a cafeteria plan.

SEE ALSO: Tax Changes and Key Amounts for the 2020 Tax Year