Possible New HSA Limits Coming?

[Sugaree]

Assuming that Sec 110213 (below) of H.R. 1 gets passed as is by the Senate, can anyone tell me if my interpretation of this is right.  I'm reading this as the base limit is going to nearly double, however it will be reduced by a percentage of an MAGI that doesn't take into account HSA deductions of that tax year.  That...seems like a nightmare to try to calculate.  I can usually get a pretty good ballpark of what my final AGI is going to be for the year, but I can see where someone who has an AGI that includes end of the year bonuses is going to be blindly guessing.  My other concern is that none of this fully spells out what the HoH calculation is going to be.  I assume that I'll have to use the $75k figure because I'm not a joint filer, but because I have a self+1 plan I have traditionally qualified for the HSA family limit. 


"SEC. 110213. INCREASE IN HEALTH SAVINGS ACCOUNT CONTRIBUTION LIMITATION
              FOR CERTAIN INDIVIDUALS.

    (a) Increase.--
            (1) In general.--Section 223(b) is amended by adding at the
        end the following new paragraph:
            ``(9) Increase in limitation for certain taxpayers.--
                    ``(A) In general.--The applicable limitation under
                subparagraphs (A) and (B) of paragraph (2) shall be
                increased by $4,300 and $8,550, respectively.
                    ``(B) Limitation based on modified adjusted gross
                income.--The amount of the increase under subparagraph
                (A) (determined without regard to this subparagraph)
                shall be reduced (but not below zero) by the amount
                which bears the same ratio to the amount of such
                increase (as so determined) as--
                            ``(i) the excess (if any) of--
                                    ``(I) the taxpayer's adjusted gross
                                income for such taxable year, over
                                    ``(II) $75,000 ($150,000 in the
                                case of a joint return, if the eligible
                                individual has family coverage), bears
                                to
                            ``(ii) $25,000 ($50,000 in the case of a
                        joint return, if the eligible individual has
                        family coverage).
                For purposes of the preceding sentence, adjusted gross
                income shall be determined in the same manner as under
                section 219(g)(3)(A), except determined without regard
                to any deduction allowed under this section.''.
            (2) Only to apply to employee contributions.--Section
        106(d)(1) is amended by inserting ``and section 223(b)(9)''
        after ``determined without regard to this subsection''.
    (b) Inflation Adjustment.--Section 223(g), as amended by the
preceding provisions of this Act, is amended--
            (1) by inserting ``, (b)(9)(A), (b)(9)(B)(i)(II),'' before
        ``and (c)(2)(A)'' each place it appears,
            (2) by striking ``clauses (ii) and (ii)'' in paragraph
        (1)(B)(i) and inserting ``clauses (ii), (iii), and (iv)'',
            (3) by striking ``and'' at the end of paragraph (1)(B)(ii),
            (4) by striking the period at the end of paragraph
        (1)(B)(iii) and inserting ``, and'', and
            (5) by inserting after paragraph (1)(B)(iii) the following
        new clause:
                            ``(iv) in the case of the dollar amounts in
                        subsections (b)(9)(A) and (b)(9)(B)(i)(II),
                        `calendar year 2025'.''.
    (c) Effective Date.--
            (1) Subsection (a).--The amendments made by subsection (a)
        shall apply to taxable years beginning after December 31, 2025.
            (2) Subsection (b).--The amendments made by subsection (b)
        shall apply to taxable years beginning after December 31, 2026."

[seattlecyclone]

Yes I was just skimming through the tax provisions of the bill last night and agree that the proposal doubles the HSA contribution limit for low/medium income taxpayers.

It doesn't seem like much of a nightmare to calculate. Just like your IRA deduction limit is determined by looking at what your income is before subtracting your IRA deduction, your HSA deduction limit would be determined by looking at what your income is before subtracting your HSA deduction.

A few other interesting HSA-related provisions I noticed in the bill:
* If you otherwise qualify for HSA contributions, the fact that your spouse has an FSA through their employer plan would no longer disqualify you from HSA contributions, so long as you don't reimburse your own medical expenses through the spouse's FSA.
* Bronze and catastrophic plans purchased through ACA exchanges would now be HSA-eligible plans even if they don't otherwise meet the definition of an HDHP.
* Married couples old enough for catch-up contributions would no longer need to have two separate HSA accounts if they both want to make catch-up contributions; they could put them both in one account if desired.

[Sugaree]

I've never been close enough to the IRA limit to ha e to deal with it.  I'll figure it out.  Not sure I could afford to max to the new limit anyway, lol.

[Bear Stache]

KFF has a concise summary comparison table of current law and proposed changes in the tax bill.

https://www.kff.org/tracking-the-health-savings-accounts-provisions-in-the-2025-budget-bill/

I'm hoping that overall it will be a net positive, with the increased contribution limits, allowing bronze plans to qualify, and expanding what counts as a qualified expense. We have a bronze ACA plan, so we were unable to contribute for the last 2 years. We'll see what actually makes it into the final version. I agree with the OP and others, some of the wording is ambiguous. Hopefully the final version will have clarification. Navigating income limits for ACA is already tricky enough without adding more complexity for HSA contributions to it.

[roomtempmayo]

I've never been close enough to the IRA limit to ha e to deal with it.  I'll figure it out.  Not sure I could afford to max to the new limit anyway, lol.

I wonder how many households make <$200k and want to put $19k in an HSA.  Probably a group that's overrepresented here and using them as savings vehicles, but seems unlikely to be a large section of the population.

[seattlecyclone]

I've never been close enough to the IRA limit to ha e to deal with it.  I'll figure it out.  Not sure I could afford to max to the new limit anyway, lol.

I wonder how many households make <$200k and want to put $19k in an HSA.  Probably a group that's overrepresented here and using them as savings vehicles, but seems unlikely to be a large section of the population.

Every year? Probably not many. However there are plans with potential out-of-pocket costs getting up in that range these days, so if you do have a big hospital bill the ability to contribute that full amount to an HSA and then take it right back out again for an instant discount could be appealing.

[JSMustachian]

I’d like to piggy back off this post since I read this information today about the potential increase to the contribution limits.

My wife’s checks are not large enough to max out the new contribution limits through her employer sponsored HSA. Can we open a second HSA account and use my post tax dollars to fund the rest?

[seattlecyclone]

I’d like to piggy back off this post since I read this information today about the potential increase to the contribution limits.

My wife’s checks are not large enough to max out the new contribution limits through her employer sponsored HSA. Can we open a second HSA account and use my post tax dollars to fund the rest?

Yes. Absolutely no requirement to contribute to your employer's HSA instead of one you establish yourself. The payroll contributions are generally exempt from social security/Medicare payroll taxes while outside contributions won't be, so you may want to see if there's anything you can adjust in her tax withholding etc. to see if she can squeeze a bit more of an HSA contribution into that paycheck.