Accavallo & Company, LLC

Inflation Increases 2025 Amounts for Health Savings Accounts

The IRS has recently issued the 2025 inflation-adjusted amounts for Health Savings Accounts (HSAs). These annual adjustments, based on inflation, are announced earlier than other inflation-adjusted amounts to give employers adequate time to prepare for the upcoming year.

Fundamentals of HSAs

At Accavallo & Company, we understand the importance of HSAs in your financial planning. An HSA is a trust established solely for paying qualified medical expenses of the account beneficiary. It can only be set up for an eligible individual covered under a high-deductible health plan (HDHP). Additionally, participants cannot be enrolled in Medicare or have other health coverage, with exceptions for dental, vision, long-term care, accident, and specific disease insurance.

Contributions to an HSA are tax-deductible up to specified limits, and these limits, along with the annual deductible and out-of-pocket expenses under the tax code, are adjusted annually for inflation.

Inflation Adjustments for 2025

According to Revenue Procedure 2024-25, the IRS has set the following inflation-adjusted figures for HSA contributions in 2025:

  • Annual contribution limits:
    • For individuals with self-only coverage under an HDHP, the limit will be $4,300 (up from $4,150 in 2024).
    • For individuals with family coverage, the limit will be $8,550 (up from $8,300 in 2024).
    • The $1,000 catch-up contribution for individuals aged 55 or older remains unchanged for both 2024 and 2025.
  • High-deductible health plan limits:
    • An HDHP will have an annual deductible of at least $1,650 for self-only coverage and $3,300 for family coverage (up from $1,600 and $3,200, respectively, in 2024).
    • Annual out-of-pocket expenses (excluding premiums) will be capped at $8,300 for self-only coverage and $16,600 for family coverage (up from $8,050 and $16,100, respectively, in 2024).

Health Reimbursement Arrangements

The IRS has also updated the inflation-adjusted amount for Health Reimbursement Arrangements (HRAs). In 2025, the maximum amount available for an excepted benefit HRA will be $2,150 (up from $2,100 in 2024). HRAs are funded by employers, and contributions are not included in the employee’s income. Reimbursements for eligible medical expenses are tax-free.

Benefits of HSAs

As your trusted tax advisors, we want to highlight the benefits of HSAs for both employers and employees. Contributions are made pre-tax, and the funds can accumulate tax-free over time. Withdrawals for qualified medical expenses, such as doctor visits, prescriptions, chiropractic care, and premiums for long-term care insurance, are also tax-free. Additionally, HSAs are portable, meaning the account remains with the holder even if they change employers or leave the workforce. Many employers find HSAs to be an attractive fringe benefit for recruiting and retaining employees.

If you have questions about how these changes impact your business or need assistance with HSA-related matters, please contact us. Our team is here to help you navigate these adjustments and optimize the benefits for your organization.

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Sherri Fisher is a Tax Manager at Accavallo & Company, LLC.  Sherri has longstanding expertise in Trust and Estate Taxation, Eldercare, and Estate planning. Sherri appreciates the relationships she has built with estate planning attorneys and advisors, to provide a team approach to assisting her clients. Sherri also has seasoned experience in business and individual taxation and is partial to assisting start-ups in developing overall accounting and operating plans.

Prior to joining Accavallo & Company, LLC, Sherri was a manager in a large firm, servicing high net worth trust clients, business, and personal clients. She was also a Partner in a large bookkeeping firm, which specialized in cloud accounting systems for regional and national companies. Sherri led a team in assisting clients to organize their accounting systems.  She is a graduate of Florida Atlantic University with a B.S. degree in Accounting.    

Sherri’s experience includes working with companies and organizations in a variety of industries including:

  • Investment Trusts

  • DAPT and Family Investment Partnerships

  • Estate and Probate Administration

  • E-Commerce

  • Manufacturing

  • Construction

  • Real Estate Investment

  • Marketing and Service-based industries

In addition to her professional accomplishments, Sherri is an Intuit Advanced Pro Advisor, Intuit Future Firm Advisory Board member, member of the Valley WIN Network, and proudly served as past Connecticut Public School liaison for the Yale Tommy Fund for Childhood Cancer. Sherri enjoys time with her family, Cleveland sports, thrifting and gardening.