Health Savings Accounts (HSAs) have become an increasingly popular way for the employees at small businesses save for medical expenses while reducing their taxable income. For 2023, the Internal Revenue Service (IRS) has updated the HSA limits to account for changes in healthcare costs and to ensure that individuals can continue to save effectively for their healthcare needs.
2023 HSA Contribution Limits. Each year, the IRS adjusts HSA contribution limits to account for inflation and other economic factors. For 2023, the HSA contribution limits are as follows:
- Individual coverage: $3,850 (an increase of $200 from 2022)
- Family coverage: $7,750 (an increase of $450 from 2022)
These limits apply to the total amount of contributions made by both the account holder and the employer, if applicable. It is important to keep in mind that any contributions exceeding these limits may be subject to income tax and an excise tax.
2023 HSA Catch-Up Contributions. Individuals aged 55 or older are allowed to make additional “catch-up” contributions to their HSAs. In 2023, the catch-up contribution limit remains unchanged at $1,000. This means that an individual aged 55 or older can contribute up to $4,850 for individual coverage or $8,750 for family coverage, including the catch-up contribution.
High-Deductible Health Plan (HDHP) Requirements. To qualify for an HSA, an individual must be enrolled in a high-deductible health plan (HDHP). IRS rules define the minimum deductible amounts and maximum out-of-pocket limits that a health insurance plan must have to qualify as an HDHP, thus allowing the policyholder to open and contribute to an HSA.
The 2023 HSA limits provide individuals and families with the opportunity to save more for their healthcare expenses while taking advantage of the tax benefits associated with these accounts. By understanding these updated limits and how they may impact your personal financial situation, you can make informed decisions about your healthcare and tax planning strategies.
This information is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2023 Angus McRae Insurance Brokerage Services, Inc. All rights reserved.