Recently. the IRS released updated guidance providing the 2024 inflation-adjusted amounts for Health Savings Accounts (HSAs).
HSA basics
An HSA is a trust established or organized exclusively for the purpose of covering the “qualified medical expenses” of an “account beneficiary.”
An HSA can only be established for the advantage of an “eligible individual” who is covered under a “high-deductible health plan.” Additionally, the participant is not allowed to be enrolled in Medicare or have other health coverage. Exceptions include:
- Vision
- Dental
- Long-term care
- Accident
- Specific disease
Within specified dollar limits, an above-the-line tax deduction is allowed for an individual’s contributions to an HSA. This annual contribution limit, along with the yearly deductible and out-of-pocket expenses under the tax code, is adjusted each year for inflation.
Inflation adjustments for the upcoming year
In Revenue Procedure 2023-23, the IRS released the 2024 inflation-adjusted figures for HSA contributions, which are as follows:
Annual contribution limit
For the 2024 calendar year, the annual contribution limit for an individual with self-only coverage under a high-deductible health plan (HDHP) will be $4,150. For an individual with family coverage, the amount will be $8,300. This is up from $3,850 and $7,750, respectively, in 2023.
There is an additional $1,000 “catch-up” contribution amount for those aged 55 and older in 2024 (and 2023).
High-deductible health plan defined
For the calendar year 2024, an HDHP will be defined as a health plan with an annual deductible that isn’t less than $1,600 for self-only coverage or $3,200 for family coverage (up from $1,500 and $3,000, respectively, in 2023).
Additionally, yearly out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) won’t be able to go above $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
HSAs offer numerous benefits. Contributions to these accounts are made on a pre-tax basis. Funds can accumulate tax-free year after year and can be withdrawn without tax implications to pay for a variety of medical expenses such as:
- Doctor visits
- Chiropractic care
- Premiums for long-term care insurance
Additionally, an HSA is “portable.” It stays with an account holder if they switch employers or leave the workforce.
Have questions? Smolin can help
If you’re unsure of how these new adjustments could impact your business or you have more questions about HSAs, contact the professional team at Smolin and they’ll walk you through the implications of these changes.