2022 Amounts for Health Savings Accounts

The IRS recently released guidance on the 2022 inflation-adjusted amounts for Health Savings Accounts (HSAs).

The basics of HSAs

HSAAn HSA is a trust created or organized exclusively for the purpose of paying the qualified medical expenses of an account beneficiary. An HSA can only be established for the benefit of an eligible individual who is covered under a high deductible health plan. A participant can’t be currently enrolled in Medicare or have other health coverage (exceptions include dental, vision, long-term care, accident and specific disease insurance).

A high deductible health plan (HDHP) is generally a plan with an annual deductible that is more than $1,000 for self-only coverage and $2,000 for family coverage. The sum of the annual deductible and other annual out-of-pocket expenses required to be paid under the plan for covered benefits (but not for premiums) can’t exceed $5,000 for self-only coverage, and $10,000 for family coverage.

Within specified dollar limits, an above-the-line tax deduction is allowed for an individual’s contribution to an HSA. This annual contribution limitation and the annual deductible and out-of-pocket expenses under the tax code are adjusted annually for inflation.

Inflation adjustments for 2022

In Revenue Procedure 2021-25, the IRS released the inflation-adjusted figures for contributions to HSAs for calendar year 2022:

Annual contribution limitation

The annual contribution limitation for an individual with self-only coverage under an HDHP will be $3,650. For an individual with family coverage, the amount will be $7,300. This is up from $3,600 and $7,200 for 2021.

High deductible health plan

An HDHP will be a health plan with an annual deductible that isn’t less than $1,400 for self-only coverage or $2,800 for family coverage (these amounts are unchanged from 2021). Annual out-of-pocket expenses (including deductibles, co-payments, and other amounts, but not premiums) won’t be able to exceed $7,050 for self-only coverage or $14,100 for family coverage (up from $7,000 and $14,000 for 2021).

Advantages of HSAs

There are several benefits to HSAs. Contributions to the accounts are made on a pre-tax basis. The money can accumulate tax free year after year and be can be withdrawn tax free to pay for a variety of eligible medical expenses such as doctor visits, prescriptions, chiropractic care and premiums for long-term care insurance. In addition, an HSA stays with an account holder if he or she changes employers or leaves the workforce.

Questions

If you have questions about HSAs for your business, contact us today.

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