IRS Increases HSA Contribution Limits For 2023
If you're eligible for HSA contributions, (GREAT NEWS) you'll be able to contribute more money starting in 2023, thanks to an inflation adjustment from the IRS.
The IRS announced recently that the contribution limits for health savings accounts (HSAs) for 2023 are increasing significantly in response to recent inflation rates, giving employers who sponsor high-deductible health plans (HDHPs) plenty of time to prepare for open enrollment season later this year.
- HSA payments for self-only coverage will have an annual inflation-adjusted limit of $3,850, up from $3,650 in 2022.
- The family HSA contribution limit will increase to $7,750 from $7,300.
The adjustments reflect a 5.5 percent increase over contribution limitations in 2022, compared to a 1.4 percent increase between 2021 and 2022.
The IRS reaffirmed HSA contribution limitations for calendar year 2023 in Revenue Procedure 2022-24, as well as the minimum deductible and maximum out-of-pocket spending for HDHPs with which HSAs are associated.
How HSAs Work?
HSA's are tax-advantaged savings accounts. Think of it as a healthcare version of a 401(k). In order to contribute to an HSA, you must have a high-deductible health plan.
Tax-deductible contributions, tax-free interest, and tax-free withdrawals for qualified medical costs are all possible with HSAs. This means that the money you put into an HSA can be utilized tax-free for expenses like medicines and copays. This can help you save money while lowering your health-care costs throughout the year.
If you choose a high-deductible health insurance plan through an employer, you are likely eligible to contribute to an HSA. If this is the case, your employer may contribute to your HSA before taxes, allowing you to save money until you meet the yearly contribution maximum.
The main benefit of an HSA? It’s 100% yours.
You can take your HSA (and the funds you contributed to it) with you if you leave your job. This is in contrast to a Flexible Spending Account (FSA), where the money is returned to your employer.
Your HSA can provide you with three separate tax benefits:
- Contributions are tax-free.
- All qualified medical expenses are tax-deductible.
- Tax-free growth
As a result, the account is the most tax-advantaged on the market!
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