HSA Contribution Amount Increases For 2015

Posted on Friday, June 06, 2014

Taxpayers who have health savings accounts (HSAs) connected with high-deductible health plans (HDHPs) may make slightly higher tax deductible contributions for calendar year 2015, the IRS has announced. The IRS recently posted the annual inflation adjustments for limits on deductible contributions to HSAs for 2015 and the inflation adjusted limits on annual deductibles for purposes of defining a high-deductible health plan (HDHP). In both cases, the HSA and HDHP limits were adjusted higher because of inflation.

Background

Code Sec. 223 provides for HSAs for certain taxpayers enrolled in an HDHP and who meet other requirements. An HSA is intended to help taxpayers to pay for qualified medical expenses not covered under the HDHP by allowing employers and employees to make excludable or deductible contributions to an HSA. The HSA account balance and earnings may be withdrawn tax-free to pay for qualified medical expenses.

To make deductible contributions to an HSA, a taxpayer must be covered under an HDHP and not be otherwise disqualified. Generally, Code Sec. 223(c)(2)(A) does not allow an HDHP to provide benefits for any year until the minimum deductible for that year is satisfied, and if a health plan provides benefits before the minimum deductible is met, that plan is not an HDHP. However, the IRS clarified last year in Notice 2013-57 that benefits for certain types of preventive care services were not subject to this rule.

Contribution limits

The 2015 annual limitation on deductible contributions under Code Sec. 223(b)(2)(A) for an individual with self-only coverage under an HDHP is $3,350, up from $3,300 for 2014. For an individual with family coverage for 2015, the annual limitation is $6,650, up from $6,550 for 2014.

HDHP

For 2015, Code Sec. 223(c)(2)(A) defines an HDHP as a health plan with an annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage (up from $1,250 and $2,500, respectively, for 2014). In addition, to qualify as an HDHP, the health plan's annual out-of-pocket expense limits for deductibles and co-pays (but not premiums) must not exceed $6,450 for self-only coverage or $12,900 for family coverage for 2015 (up from $6,350 and $12,700, respectively, for 2014).

HSA Deduction

Employer contributions to an HSA are generally already excluded from the income reported in Box 1 of an employee's Form W-2. Employee contributions not already excluded from gross income, however, may be deducted from an employee's gross income as reported on his or her Form 1040, U.S. Individual Income Tax Return. A taxpayer wishing to determine the deductibility of his or her HSA contributions should complete Form 8889, Health Savings Accounts (HSAs).

Please contact our office for more information about HSAs.

Posted in Tax Topics For Individuals

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