The IRS recently announced an increase in health savings account (HSA) contribution limits for 2020. This means you’ll be able to set aside additional pre-tax money for medical expenses!
HSAs are tied to high-deductible health plans. As employers try to shift health care costs away from the company, high-deductible plans are becoming more common. That means more Americans are becoming eligible for HSAs.
The annual limit on HSA contributions will be $3,550 (up from $3,500) for those with self-only coverage and $7,100 (up from $7,000) for family coverage. That’s about a 1.5 percent increase from this year.
The tax benefits of a HSA include:
- Contributions are tax deductible
- Interest earned is tax-free
- Tax-free withdrawals for qualified medical expenses
Unlike health care flexible spending accounts, which have a minimum year-to-year carry-over, HSAs have no limit on carry-overs or when the funds may be used. All money in an HSA belongs to the account owner and is “portable”, meaning it will stay with them even if they change jobs or leave the workforce.
We encourage HSA account owners to take an active role in managing their HSAs to make sure they don’t exceed contribution guidelines, and properly submit documentation for medical expenses that qualify for reimbursement.
Contact us if you have questions setting up your health benefits. We’re happy to help!