Tax
& Business Alert – September 2023
Abstract: The IRS has released guidance that
includes the 2024 inflation-adjusted amounts for Health Savings Accounts
(HSAs). This article lists the benefits, requirements, and contribution limits
of HSAs for 2023 and 2024.
The
IRS has released guidance that includes the 2024 inflation-adjusted amounts for
Health Savings Accounts (HSAs). The benefits of HSAs include:
contributions are made on a pretax basis; funds can be withdrawn tax-free to
pay for a variety of medical expenses, such as doctor visits, prescriptions,
chiropractic care and long-term care insurance premiums; and HSAs are
“portable,” meaning the account stays with the employee even if he or she
changes jobs or leaves the workforce.
What exactly is an HSA?
An
HSA is a trust created exclusively for the purpose of paying the qualified
medical expenses of the account holder and his or her family if a family plan
is obtained. To be eligible, an individual must be covered under a high
deductible health plan (HDHP, defined below). Participants in an HSA cannot be
enrolled in Medicare or have other health coverage, though there are exceptions,
which include dental, vision, long-term care, accident
and specific disease insurance.
Within
specified dollar limits, an above-the-line tax deduction is allowed for an
individual’s contribution to an HSA. This annual contribution limitation and
the annual deductible and out-of-pocket expenses under the tax code are
adjusted annually for inflation.
Inflation
adjustments for next year
In
Revenue Procedure 2023-23, the IRS released the 2024 inflation-adjusted figures
for contributions to HSAs, which are as follows:
HDHP
defined.
For calendar year 2024, an HDHP will be 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). 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).
Contact
your employee benefits and tax advisors if you have questions about HSAs at
your business.
© 2023