With the popularity of high deductible medical insurance plans on the rise, an increasing number of people are eligible to contribute to a Health Savings Account (HSA).
Employee or individual contributions to a Health Savings Account are either tax-deductible when made from payroll or deductible on the first page of the 1040 tax return. As a result, a taxpayer does not have to itemize their deductions in order to receive an immediate tax savings for their contribution.
Unlike a flexible spending account, contributions to a Health Savings Account do not have to be spent within the calendar year of the contribution. Savings can be retained for future use and earnings from the interest or investment gains are tax-deferred. Distributions for qualified medical expenses are tax-free. Non-qualified distributions are subject to both tax and penalty.
HSA contribution limits are as follows:
2013
Individual: $3,250
Family: $6,450
Catch-up for individuals age 55 (not 50!) and older: An additional $1,000 for a total of $4,250 or $7,450
2014
Individual: $3,300
Family: $6,550
Catch-up for individuals age 55 (not 50!) and older: An additional $1,000 for a total of $4,300 or $7,550
Contributions can be made for the prior calendar year by the tax-filing deadline. The contribution limit includes both employee and employer contributions. The maximum contributions may be limited by partial year health plan participation and/or Medicare eligibility. Please consult a qualified tax professional for any questions in regard to eligibility.
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The articles presented on this blog are general in nature and should not be assumed to be applicable to your situation. In addition, tax law changes daily and the articles on this blog are not updated to reflect these changes. Anyone receiving any part of the information on this blog should not rely on or act or refrain from acting on the basis of any matter or information contained in this blog without seeking appropriate tax, legal or other professional advice. The transmission and receipt of information contained on this blog does not form or constitute a client relationship. Nothing in this blog constitutes legal advice. Opinions rendered by tax professionals are not authority. You agree to hold Brendan Willmann, EA, forever harmless from any liability for your use or failure to use the information, advice, referrals, or suggestions provided by this blog at any time.
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