A Well being Financial savings Account, typically referred to as an HSA, means that you can pay for some medical bills with tax-free money. As you may think about, there are limits to how a lot you may contribute annually and spend the cash saved in your HSA. There may be excellent news if you’re eligible for an HSA. The contribution limits are growing for 2024.
The IRS introduced one of the crucial vital will increase to the utmost Well being Financial savings Account contribution limits for 2024. The brand new 2024 HSA contribution restrict is $4,150 if you’re single—a 7.8% enhance from the utmost contribution restrict of $3,850 in 2023. The 2024 HSA contribution restrict for households is $8,300, a 7.1% enhance from the 2023 restrict of $7,750.
For HSA customers aged 55 and older, you may contribute an additional $1,000 to your HSAs. This quantity will stay unchanged in 2024.
What Are The 2023 HSA Contribution Limits?
The Well being Financial savings Account contribution limits for 2023 are $3,850 for people and $7,750 for households. These 55 and older can contribute a further $1,000 as a catch-up contribution.
You usually have till the tax submitting deadline to contribute to an HSA. This implies for tax yr 2023, you can also make contributions up till April 15, 2024.
What Are The New 2024 HSA Contribution Limits?
Well being Financial savings Account contribution limits have elevated for 2024. The HSA contribution limits for 2024 are $4,150 for people and $8,300 for households. These aged 55 and older can contribute a further $1,000 as a catch-up contribution.
HSA Eligibility
For 2024, a high-deductible well being plan (HDHP) should have a deductible of a minimum of $1,600 for particular person protection or $3,200 for household protection. Annual out-of-pocket expense maximums (deductibles, co-payments and different quantities, however not premiums) can not exceed $8,050 for single protection in 2024 or $16,100 for household protection.
Associated: How To Keep Medical Expenses From Ruining Your Retirement
HSA Contribution Limits With out A Excessive Deductible Well being Plan
Your contributions could also be restricted if you’re studying this and should not enrolled in an HSA-eligible medical insurance plan for your complete yr. Nonetheless, if you’re nonetheless explicitly coated on December 1 of a given yr, you need to be capable of contribute the utmost for that yr to an HSA.
In case you weren’t coated by an HSA-eligible medical insurance plan for your complete yr, you might decide your prorated contribution quantity by counting the variety of months you have been enrolled in an HDHP on the primary of a month and dividing it by 12. You’d then multiply the quantity by the entire quantity you might contribute for those who have been eligible for the entire yr.
HSA Contribution Limits When You Are Enrolled In An HDHP On December 1
In case you are enrolled in an HDHP well being plan on December 1 of a given yr, you may contribute the utmost quantity you are eligible for, per the IRS’ “last-month rule.” That is true whether or not you have been enrolled in an HSA-eligible well being plan for 1 day or twelve months. The last-month rule has one huge caveat that you could comply with.
You will have to remain enrolled in an HDHP for a one-year “testing interval” working from December 1 of the yr you contribute to December 31 of the next yr. In case you are now not enrolled in an HSA-eligible HDHP throughout that yr, you could pay earnings taxes and a ten% penalty on any extra contributions you could have made while you file your tax return.
Ought to You Contribute The Most Quantity To An HSA?
There are a number of causes to contribute the utmost annually to a Well being Financial savings Account. Listed here are the three most typical causes I like to recommend you maximize your HSA contribution in a given yr.
1. You Anticipate A Giant Medical Invoice Throughout The Yr
In case you are anticipating a considerable amount of medical bills throughout a given yr, why not max out your HSA and be capable of pay for a minimum of a part of them with pre-tax cash?
2. You Need The Deduction From HSA Contributions
You will not owe earnings taxes on the cash you contribute yearly to an HSA. If you wish to scale back your taxes annually, maxing out your HSA could be a good a part of a tax-minimization technique.
3. You Need Extra Tax-Free Revenue In Retirement
In case you are already maxing out your 401(k), treating your HSA like a further retirement account could possibly be a sensible transfer. You can make investments your funds and develop fairly a pleasant pool of cash that could possibly be withdrawn tax-free to fund medical bills in retirement. You can additionally stockpile receipts and reimburse your self for all of your medical spending when you have constructed up the HSA account stability.
Associated: What Can Medical Expenses Can You Use Your HSA for?
Do Employer Contributions Have an effect on HSA Limits?
Your employer might contribute to your Well being Financial savings Account if you’re fortunate. Your employer might contribute a set quantity per worker or might make matching contributions of some sort. The IRS units whole annual limits on the quantities which may be contributed to an HSA. If an HSA is funded by employer and worker contributions, the entire contribution limits for the yr are the identical. Merely put, your employer contributions will scale back the quantity you, the worker, can contribute. Any extra cash out of your employer is an efficient factor.
Contributions made by an employer to the well being financial savings account for eligible workers are excludable from the worker’s earnings. They aren’t topic to federal earnings tax, Social Safety or Medicare taxes. In case you have been questioning, employer contributions are deductible as a business expense to the company.