IRS Raises Limits for HSAs and HDHPs for 2013
In IRS Revenue Procedure 2012-26, the IRS has announced the new inflation-adjusted increases for Health Savings Account (HSA) contributions and high-deductible health plan (HDHP) deductibles.
To qualify for an HSA, you must have a high deductible health insurance plan and no other health insurance. Linda Wallace, CPA, CEBS, senior manager at Carmel, IN-based CPA firm Blue & Co., points out that, "Once you go on Medicare, you can't continue to fund your HSA," however, the HSA can be regarded as a long-term tax-free investment to be used to cover future medical expenses.
The contributions to an HSA are tax deductible, as an above-the-line deduction, in the year in which they are made. Withdrawals are tax free as long as they are used for qualified medical expenses.
Linda Wallace, CPA, CEBS, senior manager at Blue and Co., CPAs, in Carmel, Indiana, makes these points about Health Savings Accounts:
- HSA funds are accumulated tax free.
- Withdrawals are tax free when used for current, qualified medical expense reimbursements.
- Clients who choose not to use HSA funds currently can use the HSA as an investment for the future.
- Withdrawals from an HSA can be made at any time; the account holder needs to retain receipts for the expenses.
- Medicare recipients are not eligible to make contributions to an HSA but they are still able to draw on the account to reimburse for qualified medical expenses.
- Companies considering setting up HSAs for their employees consider the expenses that will be charged by the HSA custodian.
These amounts apply to the 2013 calendar year.
- The maximum annual contribution to a self-only HSA for HDHP coverage increases from $3,100 to $3,250 for 2013.
- The maximum annual contribution to a family HSA for HDHP coverage increases from $6,250 to $6.450 for 2013.
- The age 55 and over annual catch up contribution remains at a $1,000 for 2013.
- The minimum self-only HDHP deductible increases from $1,200 to $1,250 for 2013.
- The minimum family HDHP deductible increase from $2,400 to $2,500 for 2013.
- The maximum self-only HDHP out-of-pocket expense amount (which includes deductibles and co-payments as well as other expenses) increases from $6,050 to $6,250 for 2013.
- The maximum family HDHP out-of-pocket expense amount (which includes deductibles and co-payments as well as other expenses) increases from $12,100 to $12,500 for 2013.
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