You Can Contribute Directly to Your HSA

I’ve written previously about the advantages of an Health Savings Account (HSA) account, particularly if you can afford to not reimburse yourself right away and instead use it as a stealth retirement account. The usual (and best) way to contribute to your HSA is through payroll deduction. That way it not only comes out pre-tax, but also pre-FICA. This means that if you pay into Social Security you get an extra 7.65% tax break (6.2% for Social Security and 1.45% for Medicare taxes) in addition to the federal and state (usually) tax breaks. Even for those who don’t pay into Social Security, like Colorado PERA members, you still save the 1.45% in Medicare taxes.

But just because the best way to contribute is via your paycheck doesn’t mean that you can’t contribute directly to your HSA if you need to. While you’ll lose out on the FICA tax break, you will still get the federal and state (in most states with state income taxes) tax break. You just have to remember to claim the direct contributions separately on your tax form (your contributions via your paycheck are already reflected on your W-2 so you don’t separately note them on your tax return).

As we’re approaching the end of the year, check to see how much you will contribute via your paycheck for all of 2024. The 2024 limits for HSA contributions are $4,150 for individuals (or $5,150 if you are over age 55), and $8,300 for families (or up to $10,300 if both adults are over age 55 and have individual HSAs). Make sure you include any employer contributions in your calculations.

For example, let’s say you have an individual HSA, you are under age 55, your employer will contribute a total of $1,250 into your HSA, and you will contribute a total of $2,400 into your HSA (for the calendar year 2024). Take your individual limit of $4,150 and subtract off the $1,250 from your employer and the $2,400 from you and you still have $500 you can contribute directly for 2024. Make that contribution directly and then deduct that $500 separately on your tax return. (And if you can, invest it.)

As you look forward to 2025, the limits are increased slightly.

If you are allowed to make changes to your HSA contribution amount in January, consider increasing it as much as your budget allows in order to try to max out the 2025 limit (again, don’t forget to include any employer contributions in your calculations).