HSA is a pre-tax account savings account that allows you to set aside money for qualified medical expenses. You can use these funds to pay deductibles, prescription drugs, eyeglasses, or other qualified expenses. You can even use HSA funds to purchase OTC medications.
In most years, IRS announces inflation adjustments for HSA contributions. So what are the HSA contribution limits for 2021 and 2022.
HSA Contribution Limits
2022 Maximum HSA Contribution Limits
- Individual Plan: $3,650
- Family Plan: $7,300
2023 Maximum HSA Contribution Limits
- Individual Plan: $3,850
- Family Plan: $7,750
Maximum HSA contribution limits include both employee and employer contributions. Keep this in mind as many employers contribute some amount to HSA every year.
HSA Catch-Up Contribution
If you are over 55, the catch-up contribution is $1000 for both individual and family plans for 2022 and 2023.
Requirements To Have An HSA Accounts
High Deductible Plan
To contribute to an HSA plan, you must have a high deductible health plan (HDHP). As the name implies, HDHP plans have high deductibles. Your HSA account is a way to save for your high deductible expenses.
2022 HDHP Plan limits
Minimum annual deductible – $1400 for individual/$2800 for family
Annual out-of-pocket maximum – $7050 for individual/$14,100 for family
2023 HDHP Plan limits
Minimum annual deductible – $1500 for individual/$3,000 for family
Annual out-of-pocket maximum – $7500 for individual/$15,000 for family
HSA Contribution Deadline
HSA contribution deadline is the same as the tax deadline. So you have until April of the following year to make your HSA contributions for the year (retroactive contributions)
HSA contributions can be changed mid-year if needed
During the open enrollment period, you can set up your HSA contributions. Your employer will withhold your HSA contributions from your paycheck and deposit them in your HSA account. But you can change your HSA contributions anytime during your plan year.
HSA Is A Stealth IRA
HSA accounts are great savings vehicles. You put in pre-tax dollars, you invest your money, withdraw them without paying taxes if you spend them on medical expenses. If you switch jobs, you can take your HSA with you.
Your HSA is a stealth IRA. There is no requirement that you should reimburse yourself immediately after a qualified medical expense occurs. For example, if a medical expense comes up, you can pay it yourself and keep the receipts. You can reimburse yourself in 30 years when your HSA account balance has grown considerably.
At Age 65, Your HSA Can Be Used As An IRA
Let’s say that you don’t have a lot of medical expenses and your account has grown. At age 65, you can pay taxes and withdraw the HSA funds and use them for any purpose. In other words, they become just like a regular IRA.