The IRS has announced 2022 amounts for Health Savings Accounts

5/24/2021

The IRS recently released guidance providing the 2022 inflationadjusted amounts for Health Savings Accounts (HSAs).

Fundamentals of HSAs

An 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.” In addition, a participant can’t be enrolled in Medicare or have other health coverage (exceptions include dental, vision, longterm care, accident and specific disease insurance).

A high deductible health plan (HDHP) is generally a plan with an annual deductible that isn’t less than $1,000 for selfonly coverage and $2,000 for family coverage. In addition, the sum of the annual deductible and other annual outofpocket expenses required to be paid under the plan for covered benefits (but not for premiums) can’t exceed $5,000 for selfonly coverage, and $10,000 for family coverage.

Within specified dollar limits, an abovetheline tax deduction is allowed for an individual’s contribution to an HSA. This annual contribution limitation and the annual deductible and outofpocket expenses under the tax code are adjusted annually for inflation.

Inflation adjustments for next year

In Revenue Procedure 202125, the IRS released the 2022 inflationadjusted figures for contributions to HSAs, which are as follows:

Annual contribution limitation. For calendar year 2022, the annual contribution limitation for an individual with selfonly coverage under a 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, respectively, for 2021.

High deductible health plan defined. For calendar year 2022, an HDHP will be a health plan with an annual deductible that isn’t less than $1,400 for selfonly coverage or $2,800 for family coverage (these amounts are unchanged from 2021). In addition, annual outofpocket expenses (deductibles, copayments, and other amounts, but not premiums) won’t be able to exceed $7,050 for selfonly coverage or $14,100 for family coverage (up from $7,000 and $14,000, respectively, for 2021).

Many advantages

There are a variety of benefits to HSAs. Contributions to the accounts are made on a pretax basis. The money can accumulate tax free year after year and be can be withdrawn tax free to pay for a variety of medical expenses such as doctor visits, prescriptions, chiropractic care and premiums for longterm care insurance. In addition, an HSA is “portable.” It stays with an account holder if he or she changes employers or leaves the workforce. If you have questions about HSAs at your business, contact your employee benefits and tax advisors.

© 2021

Tags: tax

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