HSA Contribution Limits Rise in 2020
Have you heard of Health Savings Accounts or HSAs? If not, they are tax-advantaged accounts for people to save for medical expenses that their health insurance doesn’t cover. Unlike Flexible Spending Accounts (FSAs), the funds contributed to an HSA don’t expire. So, if you don’t use up the money in your HSA account by year-end, it’s likely it can roll into the new year.
2020 HSA Contribution Limits Change
Luckily, 2020 HSA contribution limits will rise, so you can set aside more pre-tax money for medical expenses. The IRS announced the new limits for HSAs are increasing to $3,550 for individual coverage and $7,100 for family coverage in 2020. The catch-up contribution limit for individuals 55 and older will remain $1,000. To contribute to an HSA you must be in a qualifying high deductible health plan (HDHP).
The Tax Benefit of HSAs
Health Savings Accounts offer several tax benefits. Read on to hear them…
- Contributions are tax-deductible: You can contribute pre-tax dollars to an HSA or make tax-deductible contributions, either of which lowers your taxable income for the year and can potentially lower your tax bracket.
- Interest accrues tax-free: The interest accrued on your HSA is tax free.
- HSAs money can be used tax-free for qualifying medical purchases. You can use the money in your HSA tax-free to pay for qualifying medical expenses or purchases. See IRS Pub. 969, Health Savings Accounts, for a list of qualifying expenses such as doctor’s visits and prescription medicines.
More Help With HSAs
Maximize your HSA and other annual tax savings; consult the help of an experienced tax advisor. Get matched with a tax advisor near you.
Ready to start prepping for the tax season? Learn more steps to prepare to file your upcoming return.