Health Savings Accounts are financial based and combined with an HDHP, or high deductible health plan. HSAs provide tax advantages and can be used to pay for a number of medical expenses. A growing number of employers are providing their employees with HSAs, and it is important to familiarize yourself with the HSA contribution limits for 2017. These contribution limits may be adjusted annually by the IRS.
2017 HSA Overview
The HSA contribution limits for families and individuals will differ. Families will be expected to contribute $6,750 while individuals are restricted to $3,400. The HDHP minimum deductible for single people will be $1,300, while for families it will be $2,600. The maximum HDHP payment out of pocket may not exceed $6,550 for single individuals and $13,100 for families. However, the contribution amount for HSA 55+ is the same at $1,000 for single individuals and families.
The 2017 HSA contributions can be made up to April 15, 2018. Those that use their HSA to pay for medical expenses which are unqualified in 2017 may incur a tax penalty which can be as high as 20 percent of the distribution for the HSA. Money spent for purposes which are nonqualified may also incur income taxation.
Understanding Health Plans Which Are Account Based
HSAs are one of many health plans which are account based. Others include Healthcare Reimbursement Plans, Flexible Spending Accounts and Health Reimbursement Accounts. It is important to compare each health plan to understand the pros and cons of each. The HSA may be created by a family or individual to cover medical costs free of taxes, so long as the medical expenses are qualified. This allows them to save for the future.
Differences Between 2016 and 2017 HSA Contribution Limits
There are four primary changes which were made to the HSA contribution limits for 2017. First, the limit increased by $50 for individuals who are single, while remaining the same for families. The HDHP maximum payment out of pocket remained the same for individuals as well as families, while the HDHP minimum deductible didn’t change. Those who are aged 55 or older will not see any difference as the amount for the “catch up” stayed the same.
The Rules May Change Annually So It Is Important To Keep Yourself Updated
It is important for both employers and employees to keep up with the annual changes that may occur with these health plans, as it will impact their finances and taxes. Overall these accounts provide significant tax advantages to those that know how to use them, but not understanding the rules and guidelines can make one liable to a variety of taxes and penalties.
Both families and individuals must learn which medical operations are qualified, as these will not incur taxation and save them money, while other medical procedures which are unqualified may drive up their costs. The primary goal of these accounts is to help both individuals and families save for the future while offering them healthcare that is affordable and high in quality.