The Maximum HSA Contribution for 2022 & 2023 (Update)

This article has been updated for 2022 and 2023. The IRS has announced an inflation adjustment increase to the maximum HSA contribution for 2023, and there will be in increase over the max HSA contribution for 2022. More specifically, both the individual and family contribution maximums will increase from 2022 to 2023, which is great news for savers. The IRS announces this annual inflation increase for HSAs in May, separate from retirement accounts (e.g. 401Ks, IRAs) in November. And with inflation increasing in the past year, there will be a fairly big jump next year. There will also be increases in minimum annual deductibles and out of pocket expenses. Why should you care about HSA maximum contributions?

The Value of HSA Accounts Has Increased Recently

HSAs could always be used to pay for things like doctors visits, flu shots, prescription drugs, surgery, prescription glasses and contacts, and more. With recent legislation, the value of having an HSA account has increased. With COVID-relief, passed by Congress, it is now possible to use HSA, FSA, and HRA funds for OTC medications and menstrual care products. The ability to use these accounts for non-prescribed OTC items was removed in 2011.

Additionally, telehealth and virtual mental health services are now listed as qualified medical expenses too, as is testing and treatment of COVID-19, per IRS Notice 2020-15. That means that you can use your tax-preferred Health Savings Account (HSA) funds to pay for expenses incurred for these purposes.

And, in 2019, the IRS provided guidance that HSA-eligible HDHPs should consider a number of popular medical services, medications, and devices, such as insulin, inhalers, and statins as “preventative care“. For plans that adopt that guidance, these items could be fully covered by the insurer before the deductible.

HSA Accounts Already Had a High Value Proposition to Savers

If you’ve been following along, you know that I have been a big fan of health savings accounts over the last few years and fully max them out. Why? HSAs are like IRAs on steroids (tax-free steroids at that). They offer users pre-tax contributions, tax-free investment gains, and tax-free distributions to pay for eligible medical expenses.

With HSAs, you own the account. It goes with you and can be used regardless of future employment status or health plan. This is not the case with FSAs, which are tied to your employer.

All benefits aside, your ability to annually contribute to an HSA is determined by whether or not you are enrolled in a high deductible health plan (HDHP), as they are defined by the IRS.

For 2022, HDHPs are defined as plans that have:

• A minimum annual deductible: of at least $1,400 for individual coverage or $2,800 for family coverage; and
• Annual out-of-pocket expense maximums: (e.g., deductibles, co-payments, and other amounts, but not premiums) up to $7,050 for individual coverage or $14,100 for family coverage.

For 2023, HDHPs are defined as plans that have:

• A minimum annual deductible: of at least $1,500 for individual coverage or $3,000 for family coverage; and
• Annual out-of-pocket expense maximums: (e.g., deductibles, co-payments, and other amounts, but not premiums) up to $7,500 for individual coverage or $15,000 for family coverage.

Take this in to consideration when open enrollment comes around this fall.

Now, on to the exciting part – HSA max contribution amounts for 2022 and 2023.

2022 Maximum HSA Contribution Limits

• Individual Plan: $3,650 (+$50 over prior year)
• Family Plan: $7,300 (+$100 over prior year)

Note: The maximum HSA contribution includes both employer + employee contributions.

2023 Maximum HSA Contribution Limits

• Individual Plan: $3,850 (+$200 over prior year)
• Family Plan: $7,750 (+$450 over prior year)

Note: The maximum HSA contribution includes both employer + employee contributions.

2022 & 2023 HSA Catch-Up Contribution Amount

Similar to IRAs and 401Ks, there are catch up contributions for those age 55 and over. The HSA catch-up contribution is $1,000 for both individual and family plans for 2022 and 2023.

Can you Contribute to an HSA Outside of an Employer Payroll Deduction?

Yes, you can contribute to an HSA outside of an employer. And the same tax deductible benefits apply (you just won’t be able to fully realize them until you do your taxes for the year.

When is the HSA Contribution Deadline?

The HSA contribution deadline is the same date as the tax deadline. This means you have additional time after the end of the calendar year to retroactively make HSA contributions for that year, up until the tax deadline.

The Case for Maxing Out your HSA Contribution

In most cases, you’ll have to decide your HSA contributions for the following year during your open enrollment. Your employer will usually let you contribute a specified amount evenly across all pay periods.

Some employers will allow you to make larger contributions towards the end of the year, but you’ll have to check with your HR department.

Here’s why you should consider contributing as much as you can to an HSA. If you are young and healthy, health care costs will eventually catch up with you. HSAs allow you to build a significant cushion to protect yourself from future costs. Why pay for health care costs with after-tax dollars if you could pay with pre-tax dollars?

When you turn 65, you can use HSA funds on not just medical expenses, but anything, without penalty (non-medical expenses are taxed like Traditional IRA distributions) – so there’s little downside to contributing too much. And, remember that the entire time you can grow your contributions through investments, just like any other retirement account.

Your employer may also make tax-free contributions to your HSA, if you are enrolled in their HDHP offering.

If all of that sounds appealing and you’re interested in more on HSAs, check out the previous links in this article or IRS publication 969. Also, check out my list of the best HSA accounts if you’ve left an employer and want to move your current HSA to a new one (fees do vary quite a bit).

Should you Front-Load your HSA Contributions?

The decision of whether or not to front-load your HSA contributions in the beginning of the year has some nuances. If you have upcoming expenses and plan to keep your HDHP throughout the year, it could pay off. Otherwise, it can create a bit of a mess to clean up in order to avoid taxes and penalty.

HSA Discussion:

• Will you be maxing out your HSA this year or next year?
• Have you moved away from HDHP/HSAs now that ACA changes have taken effect?

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