Health Savings Accounts
What are the benefits of an HSA?: A health savings account (HSA) is a tax-exempt savings account created for the purpose of paying medical expenses. The funds contributed to an account are not subject to federal income tax. Contributions to the HSA are 100% deductible (up to the legal limit). You can have a tax deduction for contributions that you make to your HSA even if you do not itemize your deduction on Form 1040. If contributions are made by your employer, they are not included in your income. For others there is a line on the tax return to remove the contributions from income. Withdrawals to pay qualified medical expenses are tax free. The interest or other earnings on the assets in the account if used to pay qualified medical expenses are also tax free. Your HSA stays with you if you change employers or leave the workforce. Unused money in your HSA is not forfeited and it continues to grow.
2021 HSA Contribution Limits, Deductibles, and Out-of-Pocket Expenses: To be an eligible individual and qualify for an HSA, you must be covered under a high deductible health plan (HDHP). A high deductible health plan means the annual deductible is not less than $1,400 for self-only coverage or $2,800 for family coverage. Annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) cannot exceed $7,000 for self-only coverage and $14,000 for family coverage.
Annual contribution limitation 2021 – the annual limitation on deductions for an individual with self-only coverage is $3,600 and with family coverage is $7,200. If an individual is 55 or older, he/she could contribute an extra $1,000, which means $4,600 for an individual and $8,200 for a family.
Contribution Limit 55+ Contribution Limit Minimum Deductible Maximum Out-of-Pocket
Single
$3,600 $4,600 $1,400 $7,000
Family
$7,200 $8,200 $2,800 $14,000
A family in the 33% bracket contributing $7,100 will save approximately $2,300 in income taxes.
HSA is unavailable for contributions if you are over 65 but you can continue to use the funds in the account. Your HSA account should not be used to reimburse medical insurance premiums if you are self-employed and already deducting medical insurance as a self-employed person.
2021 HSA Contribution Limits, Deductibles, and Out-of-Pocket Expenses: To be an eligible individual and qualify for an HSA, you must be covered under a high deductible health plan (HDHP). A high deductible health plan means the annual deductible is not less than $1,400 for self-only coverage or $2,800 for family coverage. Annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) cannot exceed $7,000 for self-only coverage and $14,000 for family coverage.
Annual contribution limitation 2021 – the annual limitation on deductions for an individual with self-only coverage is $3,600 and with family coverage is $7,200. If an individual is 55 or older, he/she could contribute an extra $1,000, which means $4,600 for an individual and $8,200 for a family.
Contribution Limit 55+ Contribution Limit Minimum Deductible Maximum Out-of-Pocket
Single
$3,600 $4,600 $1,400 $7,000
Family
$7,200 $8,200 $2,800 $14,000
A family in the 33% bracket contributing $7,100 will save approximately $2,300 in income taxes.
HSA is unavailable for contributions if you are over 65 but you can continue to use the funds in the account. Your HSA account should not be used to reimburse medical insurance premiums if you are self-employed and already deducting medical insurance as a self-employed person.