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HSA contribution limits and other requirements

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It’s that time of year when workers are asked to choose their health benefit options for 2022 during an open enrollment period. If your employer offers a Health Savings Account (HSA) option as part of their benefits package, don’t dismiss it out of hand just because you don’t know how it works. After doing some research, you may find that an HSA is the way to go.

For many people, HSAs provide a tax-efficient way to pay medical bills. You can deduct your contributions to an HSA (even if you don’t itemize), contributions made by your employer are excluded from gross income, income is tax-exempt, and distributions are not taxed if you use them to pay eligible medical expenses. Plus, you can keep the account when you’re no longer working for your current employer and use it tax-free for medical expenses in another job or during retirement. Overall, HSAs can be a great tool to cover your healthcare costs.

There are, however, a few HSA limitations and requirements that are adjusted for inflation each year. They apply to how much you can contribute to an HSA for the year, your health insurance plan’s minimum deductible, and your annual out-of-pocket expenses. If you or your health insurance plan does not meet the restrictions in effect for a given year, then you can say goodbye to HSA tax savings for that year.

Your contributions to an HSA are limited each year. You can contribute up to $ 3,650 in 2022 if you have individual coverage or up to $ 7,300 for family coverage. If you are 55 or over at the end of the year, you can make an additional $ 1,000 in “catch-up” contributions. However, your contribution limit is reduced by the amount of any contributions made by your employer that are excluded from your income, including amounts paid into your HSA account through a cafeteria plan.

If you plan to adjust your 2021 HSA contributions for the latter months of this year, note that the 2021 HSA contribution limits are lower than the 2022 amounts. For individual coverage, you can contribute $ 50 less in 2021 than in 2022 For family coverage, the 2021 limit is $ 100 lower than the 2022 limit. The table below shows how the contribution limits have increased in recent years.

Year

Individual coverage

Family coverage

Catch-up contributions

2022 $ 3,650 $ 7,300 $ 1,000

2021

$ 3,600

$ 7,200

$ 1,000

2020

$ 3,550

$ 7,100

$ 1,000

2019

$ 3,500

$ 7,000

$ 1,000

2018

$ 3,450

$ 6,900

$ 1,000

2017

$ 3,400

$ 6,750

$ 1,000

To contribute to an HSA, you must be covered by a high-deductible health plan. For 2022, the Medicare plan must have a deductible of at least $ 1,400 for individual coverage or $ 2,800 for family coverage.

The minimum deductible amounts for 2022 are the same as those for 2021. The following table shows the minimum deductible amounts for the last six years.

Year

Individual coverage

Family coverage

2022 $ 1,400 $ 2,800

2021

$ 1,400

$ 2,800

2020

$ 1,400

$ 2,800

2019

$ 1,350

$ 2,700

2018

$ 1,350

$ 2,700

2017

$ 1,300

$ 2,600

The health plan should also have a limit on the medical bills that you are required to pay. Out-of-pocket expenses include deductibles, co-payments and other amounts, but do not include premiums. For 2022, the disbursement limit for individual coverage is $ 7,050 or $ 14,100 for family coverage. According to the IRS, only deductibles and expenses for services within the health plan network should be used in determining whether the limit applies.

As shown in the table below, the personal spending limits of health plans for HSAs increased each year from 2017 to 2022 to account for inflation. This includes a $ 50 jump for individual coverage and a $ 100 increase for family coverage from 2021 to 2022.

Year

Individual coverage

Family coverage

2022 $ 7,050 $ 14,100

2021

$ 7,000

$ 14,000

2020

$ 6,900

$ 13,800

2019

$ 6,750

$ 13,500

2018

$ 6,650

$ 13,300

2017

$ 6,550

$ 13,100

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