The IRS has introduced extra cost-of-living changes—these deal with modifications affecting well being financial savings accounts (HSAs), high-deductible well being plans (HDHPs), and well being reimbursement preparations (HRAs)
The small print might be present in Income Process 2023-23. Here is a abstract.
For calendar yr 2024, the annual HSA contribution restrict for taxpayers with self-only protection below a high-deductible well being plan is $4,150 (up from $3,850 in 2023). The annual HSA contribution limitation for taxpayers with household protection below a high-deductible well being plan is $8,300 (up from $7,750 in 2023).
The HSA catch-up contribution (for these taxpayers ages 55 and older) didn’t change as it is not topic to cost-of-living changes. It stays $1,000.
A high-deductible well being plan is a well being plan with an annual deductible of not less than $1,600 for self-only protection or $3,200 for household protection. The yearly out-of-pocket bills—deductibles, copayments, and different quantities—for these plans can not exceed $8,050 for self-only protection or $16,100 for household protection.
The annual contribution restrict for an excepted profit HRA is $2,100 (up from $1,950 in 2023).
These new limits are efficient for the 2024 calendar yr.
What does all of this alphabet soup imply? Here is a fast rundown.
Below part 223 of the Tax Code, eligible people can contribute to an HSA. You have to be lined below an HDHP and haven’t any disqualifying well being protection to qualify. And HDHP has to fulfill annual limits—that is what the IRS updates annually and what you will discover in Rev. Proc. 2023-23.
You can also make pre-tax contributions to your HSA independently, and your employer might decide to kick in funds. Employer contributions aren’t thought-about revenue for tax functions. Regardless of who makes the contributions, funds in an HSA will develop federal revenue tax-free.
And if you take them out? Distributions for certified medical bills, together with dental and imaginative and prescient bills, aren’t taxable for federal revenue tax functions. Qualifying medical bills embody remedy for a recognized illness or situation and have to be ordered by your physician. Medical bills embody visits for routine medical, dental, and imaginative and prescient care, specialist care, and coverings, together with medicines and follow-up visits. Medical bills may additionally embody related out-of-pocket prices, like mileage. Medical bills that qualify for the medical and dental bills deduction are usually the identical as these eligible for HSA functions.
There are restrictions. An HDHP might solely present advantages as soon as the minimal deductible is happy. In different phrases, you have to meet your deductible (out-of-pocket prices) earlier than your HDHP advantages kick in. Nonetheless, in case you mix your HDHP with an HSA, you possibly can pay these qualifying medical bills utilizing funds in your HSA.
An excepted profit HRA is obtainable with a standard group well being plan and permits employers to help with prices for added medical care, like imaginative and prescient or dental protection, coinsurance and copayments, and different prices not lined by insurance coverage. And like different HRA plans, there is no “use it or lose it”—the unused quantities roll over from yr to yr. These limits are adjusted annually for inflation, as famous above.