Inflation-adjusted limits for HSAs increase from 2019 to provide individuals and families more opportunities to save for present and future care needs.
In an effort to provide needed guidance to brokers and employers, ConnectYourCare is announcing the inflation-adjusted limits for Health Savings Accounts (HSAs), set forth annually by the Internal Revenue Service (IRS).
The new 2020 HSA contribution limits include:
The new limits increase the pre-tax amounts individuals and families may contribute to their HSA over 2019 limits by $50 and $100, respectively, while the deductible for qualifying plans also increased by $50 individuals and $100 for families. Out-of-pocket maximums are up $150 for individuals and $300 for families over 2019 limits.
“ConnectYourCare is delighted to announce the recent increases in contribution limits for HSAs,” says Harrison Stone, General Counsel, ConnectYourCare.
“While the increases are modest, ConnectYourCare appreciates the additional opportunity for Americans to prepare and pay for their health care needs,” he adds.
Why Participants Should Care
HSA contributions are typically made via pre-tax deposits through payroll deductions, but you can also make one-time or recurring after-tax contributions from “take home” pay and take an above-the-line tax deduction for those. Either way, your qualifying contributions reduce your taxable income.
If your employer contributes to your HSA account, this amount isn’t regarded as income for you and isn’t taxable. However, it does count toward your annual contribution limit.
The IRS also allows a one-time transfer of IRA funds to an HSA, but that transfer combined with all other HSA contributions made for that year cannot exceed the yearly maximums.
If for some reason you exceed your HSA contribution limit for a given year and fail to remove the excess contributions prior to the last day to file a tax return, the IRS will require you to pay a 6% tax for each year that goes by and you are liable for taxes owed on the amount that should have been part of your gross taxable income rather than your tax-exempt HSA.
That’s why it’s so important to be aware of the HSA contribution limits impacting you for a given year. For answers to some common HSA questions, make sure you check out our Health Savings Account FAQs page.