Plan Ahead for Health Savings Accounts in 2024
The Internal Revenue Service (IRS) has recently provided guidance, including the inflation-adjusted amounts for Health Savings Accounts (HSAs) applicable in 2024. HSAs offer numerous benefits, such as contributions made on a pre-tax basis, tax-free withdrawals for various medical expenses, and portability, allowing the account to stay with the individual even through job changes or workforce exits.
Understanding Health Savings Accounts (HSAs):
An HSA is a trust dedicated to covering qualified medical expenses for the account holder and family (if applicable), with eligibility contingent on being covered under a high-deductible health plan (HDHP).
Eligible individuals cannot be enrolled in Medicare or possess other health coverage, with exceptions for certain insurances like dental, vision, long-term care, accident, and specific disease coverage.
Key Features of HSAs:
Above-the-line tax deduction for individual contributions within specified dollar limits.
Annual contribution limits, deductible amounts, and out-of-pocket expenses are adjusted annually for inflation.
Inflation Adjustments for 2024: In Revenue Procedure 2023-23, the IRS has released the following inflation-adjusted figures for 2024:
Annual Contribution Limitation:
Self-only coverage: $4,150 (up from $3,850 in 2023).
Family coverage: $8,300 (up from $7,750 in 2023).
Additional $1,000 "catch-up" contribution for individuals aged 55 and older.
HDHP Definitions for 2024:
Annual deductible for self-only coverage: $1,600 (up from $1,500 in 2023).
Annual deductible for family coverage: $3,200 (up from $3,000 in 2023).
Out-of-pocket expenses (excluding premiums) for self-only coverage: $8,050 (up from $7,500 in 2023).
Out-of-pocket expenses for family coverage: $16,100 (up from $15,000 in 2023).
These adjustments reflect the IRS's commitment to keeping pace with inflation while supporting individuals in managing their medical expenses effectively.
For further details or assistance, feel free to contact our team at ECS Financial Services.
About the Author - Vi Nguyen, CPA, is a Supervisor at ECS Financial Services, joined the firm in 2020, and has over five years of experience in Public Accounting serving clients in a variety of industries. Vi’s area of expertise include personal income tax, tax planning, and direct and indirect taxation for businesses. Vi is a licensed CPA in the state of Illinois and holds a Master’s degree in Accounting from DePaul University and a Bachelor’s Degree from University of Wisconsin – Milwaukee.
