Banking on your HSA

Planning your Health Savings Account contributions for the upcoming year

If you’re worried about healthcare costs in 2025, managing them through your Health Savings Account (HSA) can help.

Planning your HSA contributions can change how much you spend on healthcare and how much you save. Here’s how to do it effectively.

What is an HSA?

An HSA is a health savings account that helps you pay for medical, dental and vision expenses.

You can’t open an HSA or contribute to one without being enrolled in a qualified high-deductible health plan. HSAs have a triple tax benefit:

• Contributions can be made directly from your paychecks and reduce your taxable income
• Any interest earned is tax-free
• You don’t pay taxes on withdrawals for qualified medical, dental and vision expenses

In 2025, you can contribute these amounts to your HSA:

• Individuals: $4,300
• Families: $8,550 (applies to health plans insuring one or more family members)
• Age 55 or older: You can add an extra $1,000 – known as the catch-up provision

 Assess your healthcare needs

Think about your healthcare needs for the coming year. Look at your medical, dental and vision expenses from last year and consider:

• Expected medical costs (like check-ups and prescriptions)
• Ongoing treatments for chronic conditions
• Family planning expenses, like maternity costs
• Orthodontia treatment

Create a budget

Decide how much you can set aside each month. You can contribute the maximum amount or choose a smaller amount. Make sure you optimize any employer matching if applicable and if you can afford to do so. Don’t forget to include any amount your employer may contribute to your HSA. This can help you reach the maximum limit without adding too much from your paycheck.

Maximize your contributions

Contributing the most to your HSA can improve your financial situation:

• Contributions lower your taxable income and can reduce your tax bill
• With many HSA plans, you can invest the money. It’s a great way to save for healthcare costs in retirement. Check with your HR department.
• Your HSA funds carry over from year to year

Review and adjust regularly

As you add money to your HSA, track your healthcare expenses. This helps you follow IRS rules and make the most of your account. It also prepares you for possible audits. Also, check your contributions from time to time. If you get a raise or bonus or face unexpected medical costs, consider changing your contributions.

Plan for long-term savings

An HSA can be a retirement tool in addition to other retirement accounts like 401(k)s or IRAs. Unused HSA funds roll over each year, and you can invest this money. If you expect low medical expenses, consider maximizing your contributions for future use.

This article is for information purposes only and not tax advice. Speak to your tax advisor regarding your specific situation.