The IRS recently announced the updated Health Savings Account (HSA) contribution limits for 2024 along with the adjusted limits for corresponding High-Deductible Health Plans (HDHPs).
The annual deduction limit on HSA contributions for a person with self-only coverage under a High-Deductible Health Plan for calendar year 2024 is $4,150 (up from $3,850), and a $8,300 (up from $7,750) annual deduction limit for a person with family coverage in a HDHP.
2023 highlights: The annual deduction limit on HSA contributions for a person with self-only coverage under a HDHP increased by $200 to $3,850 for calendar year 2023. The annual deduction limit for a person with family coverage under a HDHP increased by $450 to $7,750 in 2023.
Before we dive deeper into the updates for 2023 outlined in Revenue Procedure 2022-24, the following is a brief refresher on HSAs.
HSAs explained.
As explained by the IRS, a Health Savings Account (HSA) is a tax-advantaged trust or custodial account you set up with a qualified HSA trustee to pay or provide reimbursement for certain medical expenses you incur. In other words, the HSA was designed to pay for day-to-day medical costs via HSA funds that an individual or family member may incur while remaining tax-free.
The account is owned by the employee and money is deposited directly into the individual’s account.
Employees may make contributions in the form of lump sum contributions or pre-tax payroll deductions. An employer may also contribute to the account.
As soon as funds accumulate, they are available. This differs from a health flexible spending account (FSA) that has uniform coverage, in which the full balance is available on the first day of the plan year.