Health Savings Account
Health savings account (HSA) contribution limits for 2021 are going up $50 for self-only coverage and $100 for family coverage, the IRS announced May 21, giving employers that sponsor high-deductible health plans (HDHPs) plenty of time to prepare for open enrollment season later this year.
The annual limit on HSA contributions will be $3,600 for self-only and $7,200 for family coverage. That’s about a 1.5 percent increase from this year. In Revenue Procedure 2020-32, the IRS confirmed HSA contribution limits effective for calendar year 2021, along with minimum deductible and maximum out-of-pocket expenses for the HDHPs with which HSAs are paired.
A Health Savings Account (HSA) is a personal savings account for health care expenses that allows you to set aside money on a pre-tax basis. An HSA can be used immediately, next year or can be saved for retirement.
Health Savings Accounts (HSA ) offered by banks are a win-win with a NOVA Pathfinder HealthCare High Deductible Healthcare Plan. Setting up an HSA can take less than 10 minutes, but the benefits are long lasting.!
- An HSA allows you to make tax-free deposits each year.
- You can withdraw funds from your HSA at any time to pay for medical expenses not paid by your High Deductible Healthcare Plan.
- You can use the account to pay for the medical expenses of a spouse or other family member—anyone that is part of your tax household.
- Your funds are never lost; instead, they continue to roll over year-to-year.
- As long as you are using your HSA funds for medical expenses, there are no fees associated with withdrawal. If you use funds for non-medical expenses before the age of 65 you will have to pay a 20 percent penalty as well as income tax. After 65, you can withdraw your HSA funds for non-medical expenses without incurring a penalty; however, you will still owe income tax on the withdrawal. As long as you use your HSA funds for medical expenses, the withdrawals are tax-free.
A health savings account (HSA) can provide those with a High Deductible Healthcare Plan a nest egg for future medical expenses or it can help pay for immediate, unexpected health issues. The biggest benefit of an HSA is the tax advantage. The money that goes into your HSA can be deducted pre-tax by your employer’s payroll or it can be deducted from your income tax on your tax return. While your employer chooses the bank where your HSA will be housed, you are free to transfer your funds to another HSA institution at any time. If an HSA is not an option with your employer, you can still sign up for one on your own through either a bank, credit union or brokerage firm of your choosing. If you are interested in opening an HSA, talk to your NOVA Personal Care Advocate for more information. If you have an Individual High Deductible Healthcare Plan, you are able to contribute up to $3,600 to your HSA each year (this amount is specific to the year 2020 and fluctuates each year). If you have a family plan, the contribution maximum is $7,200. In addition, if you are over the age of 55, you can contribute an extra $1,000 a year as a “catch-up contribution.” As stated above, you can withdraw money from your HSA for medical expenses at any time. Expenses can include deductibles, copayments, coinsurance, vision and dental care, and other out-of-pocket medical costs. Many holistic services also qualify as approved medical expenses (see IRS Publication 502 for details). They say sharing is caring. Your HSA allows you to share the wealth with a spouse or other family member, which means you can use your funds to pay for medical expenses of anyone who is a part of your “economic family unit,” or tax household. While there is no penalty or additional tax incurred if you withdraw funds from your HSA for medical expenses, there is a 20 percent penalty and the funds are subject to income tax if they are used for anything other than medical needs. After the age of 65, that penalty is waived, but you will still have to pay income tax on those funds if they are not used for health reasons. You can also use HSA funds to pay Medicare premiums for Part B, D and C (Medicare Advantage) after the age of 65 Check out Bank of America HSA User Guide for more information.
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