An HSA is an account set up for the purpose of paying the “qualified medical expenses” of an “account beneficiary.” An HSA can only be established if you have a qualifying “high deductible health plan.” In addition, a participant can’t be enrolled in Medicare or have other health coverage (exceptions include dental, vision, long-term care, accident and specific disease insurance).
In general, a high deductible health plan (HDHP) is a plan that has an annual deductible limitation and the sum of the annual deductible and other annual out-of-pocket expenses required to be paid under the plan for covered benefits (but not for premiums) cannot exceed limits. The charts below compares 2019 thru 2021 for both of these limits:
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The annual contribution is an above-the-line tax deduction to the extent an employer has not made tax free contributions to the HSA or the employee made pre tax contributions thru and employer plan. The annual contribution limit comparisons are in the chart below:
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There are many advantages to HSAs. Contributions to the accounts are made on a pre-tax basis. The money can accumulate year after year tax free and be withdrawn tax free to pay for a variety of medical expenses such as doctor visits, prescriptions, chiropractic care and premiums for long-term-care insurance. In addition, an HSA is “portable.” It stays with an account holder if he or she changes employers or leaves the work force.
Due to the extension of the tax filing deadline to July 15, 2020 for 2019 individual tax returns, the deadline for making HSA contributions for 2019 is also extended until July 15, 2020. The contribution deadline is normally April 15th.
For more information on HSA’s and how they could benefit you please contact us.