The IRS has released contribution amounts for Health Savings Accounts (HSAs) for the 2023 calendar year. Based on the current rate of inflation, it’s not surprising that these went up substantially. Here’s a comparison to current 2022 contribution levels:
|HSA contributions – self-only coverage||$3,850||$3,650|
|HSA contributions – family coverage||$7,750||$7,300|
|Catch up contributions (age 55+)||$1,000||$1,000|
High Deductible Health Plan Coverage is Required
Health savings accounts are available to participants in a high-deductible health plan (HDHP) that has a certain minimum deductible amount and a maximum out of pocket amount. Here are those numbers for this year and next:
|HDHP minimum deductible – self-only coverage||$1,500||$1,400|
|HDHP minimum deductible – family coverage||$3,000||$2,800|
|HDHP maximum out-of-pocket amounts – self-only coverage||$7,500||$7,050|
|HDHP maximum out-of-pocket amounts – family coverage||$15,000||$14,100|
What are health savings accounts (HSAs)?
HSAs provide a tax advantaged way to set money aside for “qualified medical expenses”. An HSA can be set up by individuals or can be part of a company-sponsored employee benefit plan, in which case pretax contributions can be made through a cafeteria plan. As long as funds are used for qualified medical expenses, they can be both contributed and withdrawn from the HSA tax-free.
Qualified medical expenses are those that would generally qualify for the medical and dental expenses tax deduction. For a list, refer to IRS Publication 502, Medical and Dental Expenses. In addition, some over the counter products can be covered, as well as certain insurance premiums.
Unused amounts in an HSA can carry over year after year without limit. And they’re portable – if an HSA is initially set up through a company, employees can take their account with them when they leave.
In order to be eligible for an HSA, a participant is not allowed to have other health plan coverage, including Medicare or even medical reimbursement flexible spending accounts (FSAs). However, “limited use” FSAs that cover non-medical expenses (such as dental) are allowed in conjunction with an HSA. And other types of insurance such as dental, vision, long term care, accident, and specific disease insurance are also allowed.
For more information about HSAs, see IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.