The IRS recently released the 2024 inflation-adjusted amounts for Health Savings Accounts (HSAs).
Fundamentals of a Health Savings Account
An HSA is a trust that is designed to pay for the “qualified medical expenses” of an “account beneficiary.” It can only be set up for an “eligible individual” who is covered under a “high-deductible health plan.” It’s important to note that Medicare enrollees or those with other health coverage (with the exception of dental, vision, long-term care, accident, and specific disease insurance) are not eligible to participate.
A high deductible health plan (HDHP) is generally a plan with an annual deductible that isn’t less than $1,000 for self-only coverage and $2,000 for family coverage. Additional annual out-of-pocket expenses (but not premiums) for covered benefits under the plan must not exceed $5,000 for self-only coverage and $10,000 for family coverage.
Individuals can deduct above-the-line contributions to a Health Savings Account within specified dollar limits. Annual adjustments are made to the contribution limits and the deductible and out-of-pocket expenses under the tax code to ensure that they are in line with inflation.
Inflation adjustments for 2024
In Revenue Procedure 2023-23, the IRS released the 2024 inflation-adjusted figures for contributions to Health Savings Accounts, which are as follows:
Annual contribution limitation. An individual with self-only coverage under an HDHP will be able to contribute up to $4,150 per year in 2024. Individuals with family coverage will be able to receive $8,300. It’s an increase from $3,850 and $7,750 in 2023. There is an additional $1,000 “catch-up” contribution amount for those age 55 and older in 2024 (and 2023).
High deductible health plan defined. In addition, annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) won’t be able to exceed $8,050 for self-only coverage or $16,100 for family coverage (up from $7,500 and $15,000, respectively, in 2023).
Advantages of HSAs
There are a variety of benefits to HSAs. Pre-tax contributions are made to the accounts. This money can accumulate tax-free year after year, and it can be withdrawn tax-free to pay for various medical expenses, including doctor’s visits, prescriptions, chiropractic care, and long-term care insurance premiums. In addition, a Health Savings Account has the benefit of being “portable,” meaning it remains with the account holder even if they switch employers or retire. If you have any inquiries about implementing HSAs for your business, contact us or one of Landmark Financial’s Certified Employee Benefit Specialists.
© 2021. Updated May 2023.