A Health Savings Account (HSA) is a tax-advantaged savings account whose funds can be used to pay qualified health care costs for you, your spouse and your dependents. The account is a great way to pay for qualified health care costs with pre-tax dollars. In fact any investment gains on your funds are also tax-free as long as they are used to pay for qualified medical, dental or vision expenses. Best of all, you don’t have to spend money saved in an HSA all at once since unused funds can be carried over from one year to the next. To qualify for this tax-advantaged account you must be enrolled in a high-deductible health plan (HDHP).
Much like an IRA or a 401(k), there are limits on how much you can contribute to an HSA in a year, and these limits are adjusted on an annual basis. The HSA limits for 2020 have now been announced, and appear below.
HSA Maximum Annual Contribution Limits
|Self (under age 55)||$3,550||$3,500|
|Self (age 55 or older)||$4,550||$3,500|
|Family (under age 55)||$7,100||$7,000|
|Family (age 55 or older)||$8,100||$8,000|
HDHP Health Insurance Requirements
Note: An HDHP plan has minimum deductible requirements that are typically higher than traditional health insurance. To qualify for an HSA, your coverage must have out-of-pocket payment limits in line with the maximums noted above.
If you have questions about HSAs or whether you qualify to use one, please contact our office. We would be happy to discuss if an HSA makes sense in your circumstances.