Health savings accounts (HSAs) are a tax-advantaged way for many people to pay for medical expenses. Contributions to an HSA are eligible for an “above-the-line” deduction. Your employer’s money put into an HSA is excluded from gross income, profits are tax-free, and payouts are tax-free if used to cover qualified medical expenditures. You can also keep the account after leaving your current employment and use it tax-free for medical costs at another job or even during retirement. Overall, HSAs can be a valuable tool for paying for medical expenses. However, there are a few restrictions and regulations to be aware of, which are modified for inflation each year. They impact the amount you can put into an HSA for the year, your health insurance plan’s minimal deductible, and your annual out-of-pocket spending. If you or your health plan does not comply with the restrictions in force for any given year, you will lose your HSA tax savings for that year. HSA Contributions Are Capped Each Year. If you have self-only coverage, you’ll be able to contribute up to $3,650 in 2022 or up to $7,300 if you have family coverage. You can contribute an extra $1,000 in “catch up” payments if you’re 55 or older at the end of the year. However, your contribution maximum is lowered by the amount of any deductible contributions made by your employer, including the contributions to your account through a cafeteria plan. You can still contribute to an HSA for 2022 until April 18, 2023. The table below depicts how contributions limitations have risen in recent years (and for 2023 HSAs). YearSelf-Only CoverageFamily CoverageCatch-Up Contributions2023$3,850$7,750$1,0002022$3,650$7,300$1,0002021$3,600$7,200$1,0002020$3,550$7,100$1,0002019$3,500$7,000$1,0002018$3,450$6,900$1,0002017$3,400$6,750$1,000 Enrollment in a high-deductible health plan is required to contribute to an HSA. A deductible of $1,400 or more for self-only coverage or $2,800 for family coverage is necessary for 2022. The minimum deductible amounts for the six most recent years are shown below (plus for 2023). YearSelf-Only CoverageFamily CoverageCatch-Up Contributions2023$3,850$7,750$1,0002022$3,650$7,300$1,0002021$3,600$7,200$1,0002020$3,550$7,100$1,0002019$3,500$7,000$1,0002018$3,450$6,900$1,0002017$3,400$6,750$1,000 You must also be limited in your out-of-pocket medical payments under the health plan. Deductibles, copayments, and other out-of-pocket costs are included, but premiums are not. The out-of-pocket limit for self-only coverage in 2022 is $7,050 for self-only coverage and $14,100 for family coverage. According to the IRS, only deductibles and expenses for services within the health plan’s network should be utilized to determine if the limit applies.
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