With Health Savings Accounts (HSAs), individuals and businesses buy less expensive health insurance policies with high deductibles. Contributions to the accounts are made on a pre-tax basis. The money can accumulate year after year tax free, and be withdrawn tax free to pay for a variety of medical expenses such as doctor visits, prescriptions, chiropractic care and premiums for long-term-care insurance.
Participating employers can also contribute to accounts, on behalf of their employees.
Here are the 2016 limits for individual and family coverage, which were announced by the IRS in Revenue Procedure 2015-30. They are determined after the IRS applies cost-of-living adjustment rules, and the changes in the Consumer Price Index for the relevant period.
- HSA Contribution Limits. The 2016 annual HSA contribution limit for individuals with self-only HDHP coverage is $3,350 (unchanged from 2015), and the limit for individuals with family HDHP coverage is $6,750 (a $100 increase from 2015).
- High-Deductible Health Plan (HDHP) Minimum Required Deductibles. The 2016 minimum annual deductible for self-only HDHP coverage is $1,300 (unchanged from 2015) and the minimum annual deductible for family HDHP coverage is $2,600 (unchanged from 2015).
- HDHP Out-of-Pocket Maximums. The 2016 maximum limit on out-of-pocket expenses (including items such as deductibles, copayments, and coinsurance, but not premiums) for self-only HDHP coverage is $6,550 (a $100 increase from 2015), and the limit for family HDHP coverage is $13,100 (a $200 increase from 2015).
For more information about HSAs, contact Adam E. Panek, CPA. Adam practices in the areas of individual, partnership, and corporation tax return preparation and tax planning for individuals and businesses. Contact Adam at 315.701.6328, or 800.422.1385 or [email protected].