To summarize, the taxpayer bears the responsibility for any excess amount that is depicted in a case study.

Grace, who is 28, created a Health Savings Account (HSA) in 2024 and made the maximum contribution. She spent $3,000 on medical expenses during the year. The marginal tax rate that applies to her is 20%. What distinguishes Grace's after-tax medical expenses from her before-tax medical expenses?

The maximum allowed annual contribution to an HSA is $4,150 for 2024 taxpayers who are under age 55. Grace's tax-deductible HSA covers all of her medical expenses, so her after-tax cost is zero compared to her before-tax cost.

If your medical expenses are higher than your contributions in a Health Savings Account (HSA) plan, you will have to pay the extra amount out-of-pocket. HSAs are intended to assist you in saving for medical expenses, but they have annual contribution limits.  If your expenses exceed what you contributed, you will have to cover the difference yourself.