Part 5: Unlock Bigger Tax Savings: The 2025 HSA Contribution Rules You Must Know

Unlock Bigger Tax Savings: The 2025 HSA Contribution Rules You Must Know

Most people think HSA contributions are simple — “just put in the yearly max.”
But the IRS has far more rules behind the scenes, including monthly eligibility, proration, the last-month rule, mid-year job changes, employer contributions, excess penalties, and coordination with Medicare.

1️⃣ 2025 HSA Contribution Limits

For 2025, the IRS allows the following maximum HSA contributions:

• Self-only HDHP coverage: $4,300
• Family HDHP coverage: $8,550
• Catch-up contribution (age 55+): additional $1,000

These limits include both your contributions and your employer’s contributions.
The combined total cannot exceed the annual limit.

2️⃣ How Monthly Eligibility Really Works

HSA contribution limits are normally calculated on a monthly basis.
To contribute the full annual amount, you must be an eligible individual (see Part 4) on the first day of every month of the tax year.

You can contribute:

• 1/12 of the annual limit for each month you are HSA-eligible.
• Your coverage type (self-only or family) for each month determines the amount.

3️⃣ The “Last-Month Rule” — Powerful but Risky

The IRS allows a special shortcut called the last-month rule:
If you are an eligible individual on December 1, you may contribute the full annual limit for that year — even if you were only eligible for one month.

However, this rule comes with a major catch:

• You must remain HSA-eligible through December 31 of the following year.
• This is called the testing period.

4️⃣ Employer Contributions & Coordination Rules

Employer contributions include:

• Direct contributions to your HSA
• Cafeteria (Section 125) plan contributions
• Employer seed money for opening an HSA

All employer contributions count toward your annual limit, even if the employer calls them “free money,” “HSA credit,” or “funding incentive.”

Employer contributions are also subject to comparability rules unless made through a cafeteria plan.
Most employers avoid comparability issues by contributing through Section 125.

5️⃣ Excess Contributions & Penalties

You have an excess contribution if:

• You contribute more than the IRS limit, or
• You contributed during months you were not HSA-eligible.

Penalties:

• 6% excise tax per year on the excess amount
• Tax applies every year until corrected

You can fix excess contributions by:

• Withdrawing the excess plus earnings before the tax filing deadline, or
• Applying the excess to next year’s contributions (only if eligible).

6️⃣ Special Situations (Medicare, Marriage, Job Changes)

📌 Medicare

If you enroll in any part of Medicare, you must stop contributing to your HSA.
But you can continue to use your HSA for qualified medical expenses.

📌 Marriage & Spousal Coverage

• If one spouse has self-only HDHP and the other has family HDHP, the family limit applies.
• Catch-up contributions are always individual — each spouse needs their own HSA.

📌 Changing Jobs

If you switch from HDHP to non-HDHP coverage mid-year, your contribution limit must be prorated unless the last-month rule applies (and you satisfy the testing period).

💬 Frequently Asked Questions