2023 HSA inflation adjustments are "largest ever seen."

A breakdown of 2023 inflation adjustments within the context of HSA history.

Inflation is (rightly) the center of many of our conversations about policy and the economy right now. Did you know that inflation also impacts regulation regarding health savings accounts (HSAs)? The IRS recently made their annual HSA inflation adjustments for 2023, and they’re historical.

Key Takeaways

  • 2023 increases are the highest in HSA history.
  • Adjustments reflect the highest inflation in decades.

2023 Contribution Limits

Let's start by reviewing 2023's adjustments.

Table showing contribution limit increases for 2023. Self-only contribution limits increased $200 (5.5%) and family contribution limits increased $450 (6.2%).
HSA contribution limits increased 5.5% and 6.2% for 2023.

For 2023, the individual contribution limit increased to $3,850, a $200 (5.5%) increase, and the family contribution limit increased to $7,750, a $450 (6.2%) increase. But how significant are these increases within the history of the HSA? 

HSA Adjustment History

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 introduced health savings accounts (HSAs), going into effect for the 2004 tax year. The Medicare Prescription Drug Act also required the IRS to do annual cost-of-living adjustments, starting in 2005.

line chart showing the annual percentage increases for HSA contribution limits since 2005.
The IRS has adjusted HSA contribution limits for inflation since its establishment.

In 2023, the IRS increased individual and family contribution limits by $200 (5.48%) and $450 (6.2%). The next closest year? 2007, when the IRS adjusted individual and family contribution limits by $150 (5.56%) and $200 (3.67%). 2023's increases are the highest overall adjustments made in the history of the HSA (2004-2023).

How the IRS Calculates Inflation

IRS economists calculate inflation based on the chained CPI, an index that captures the current cost of goods in the economy. They apply that percentage to HSA amounts (e.g., contribution limits) and round to the nearest $50. If you want to geek out, the 26 U.S. Code § 223 (G) spells out cost-of-living adjustments. To state the obvious, it makes sense why 2023's increases are so high. Consumer prices are increasing at their fastest rate in almost forty years, and 2023 inflation adjustments reflect it. 

Note: The IRS uses the non-rounded amount from the previous year to calculate next year's adjustment. For this reason, some years may show no increase.

What Industry Experts Are Saying

We reached out to the Founder & President of HSA Consulting, Roy Ramthun, for his thoughts on the increase. Roy led the U.S. Treasury Department’s implementation of HSAs after they were enacted into law in 2003 and is a nationally-recognized expert on health savings accounts and consumer-directed health care issues.

"The most recent changes in the HSA amounts were the largest we have ever seen since the program began in 2004.  But that was primarily due to the fact that the change in inflation over the previous 12 months was around 8 percent instead of the 3 percent annual average we had been used to."

Roy Ramthun
Founder & President of HSA Consulting
Josh Hostetler

Josh leads content for First Dollar, a fintech company that builds infrastructure for health spending benefits. Before First Dollar, Josh led course creation at Aceable, taught First Grade, waited tables at Olive Garden, and wore many other hats. He misses the breadsticks.