As we look ahead to 2025, the IRS / DOL has announced their important annual updates to Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). This time of year we always like to post reminders, especially for those who are looking to maximize their tax savings as early as possible (aka January 1). The changes and updated amounts just like in years past will affect contribution limits and eligibility requirements for the upcoming year.
Let’s break down some key points:
Health Savings Accounts (HSAs)
HSAs continue to be a popular option for individuals with high-deductible health plans. Here are the updates for 2025:
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Increased contribution limits:
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For self-only coverage: $4,300 (up from $4,150 in 2024)
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For family coverage: $8,550 (up from $8,300 in 2024)
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Catch-up contributions: The additional $1,000 catch-up contribution for those 55 and older remains unchanged
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High Deductible Health Plan (HDHP) requirements:
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Minimum deductible for self-only coverage: $1,650
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Minimum deductible for family coverage: $3,300
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Maximum out-of-pocket expenses for self-only coverage: $8,300
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Maximum out-of-pocket expenses for family coverage: $16,600
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Flexible Spending Accounts (FSAs)
For those NOT on an HSA eligible plan, FSA’s can be a very popular vehicle to still help save some tax dollars and help pay for various out of pocket expenses. BUT PLEASE remember when thinking about contributing into an FSA, it is a use it or lose it program so contribute only what you know you can use. Most FSA programs have either an extended time to file claims or a rollover provision but the use it or lose it feature can still burn a little bit if you maxed your contributions and then didn’t have many expenses. Most people don’t need a pantry full of $3000 of aspirin. Normally we recommend calculating what you know for sure you will spend over the course of your 12 month plan and make contributions based on that, not necessarily what the allowed maximum is.
The IRS just announced updates for 2025 so here goes:
Increased contribution limits:
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Maximum Health FSA Contribution: $3,300 (up from $3,200 in 2024)
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Maximum Health FSA Carryover (if your plan allows for one): $660 (up from $640 in 2024)
Key Takeaways / Things to Remember
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HSA contribution limits are increasing for both self-only and family coverage in 2025.
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HDHP minimum deductibles and maximum out-of-pocket expenses are also rising (these are specific to the health plans the ins. companies provide).
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The catch-up contribution for HSAs remains at $1,000 for those 55 and older – this has not changed in a long time, I personally wish the IRS would start updating this annually as well.
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FSA limits for health FSA’s in 2025 are up $100 from 2024 to a max of $3300 per year.
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There’s an add’l $20 available for health FSA carryovers as well. Just because these are the maximums, check your company’s plan options, not all FSA’s necessarily have to allow to the max.
These updates provide opportunities for individuals to save more in their HAS’s and FSA’s and potentially cover more medical expenses tax-free. As always, it's important to review your healthcare needs and financial situation to determine the best approach for you and your family.
A couple things for consideration. On the HSA side, the savings are great and these are NOT use it or lose it programs / accounts. These are really geared to be long term savings vehicles, BUT first and foremost (in my opinion), the medical plan also has to work for you. If the plan itself isn’t a good fit for you and or your family, then the tax savings are a moot point. HSA eligible medical plans have no first dollar benefits other than preventive benefits and in many instances have a pretty high deductible that has to be met before the insurance kicks in.
On the FSA side, these programs are great because they can be paired with copay plans which most people prefer. HOWEVER, as mentioned, FSA’s are use it or lose it type programs so contribute wisely. A pre-tax deduction out of your check that you end up losing doesn’t help you much. Yes, you lowered your taxable income but you also lost that income. Thanks for reading, here’s to a happy, healthy and hopefully, little bit less-taxed 2025!!!
Ryan / Team HBC
