HSA, the best way to submit health care costs, come with very significant tax reliefs. For starters, the IRS has only recently increased the annual restrictions on HSA’s contributions for 2024: “Annual contributions to each account in CDHP.”
HSA contribution limit
A healthcare account (HSA) is a savings account for taxes that allows individuals to set money to pay for qualified medical expenses.
HSAs provide a triple tax advantage: contributions are usually taxable, investment earnings increase tax on taxes, and withdrawal for qualified medical costs are tax-free.
For the tax year 2024. IRS established the following limitations of contributions for HSAS: individual coverage: $ 4,150, family coverage: 8,300 USD. Contributions are allowed for those over 55 years.
HSA 2024 contribution restriction
Amount for the restrictions of HSA 2024 contributions:
- Individual coverage: $ 4,150
- Family coverage: $ 8,300
- Command Contribution (if older than 55 years): $ 1,000
This means, if there is a compensation limit, then the limit of individual contribution is the sum of this basic contribution plus that restriction of contributions.
Qualifying requirements for HSA 2024
In order to qualify for contributing to the health savings account (HSA) during 2024, you must meet the following qualifying requirements:
Fulfillment of conditions for a high deduction health plan
- You must have coverage within the high health care plan (HDHP).
- Minimum bounce: annual decelerating funds should not be smaller than:
- $ 1,600 for individual coverage
- $ 3,200 for family coverage
- Maximum costs from pocket: Annual maximum of pocket (including bounce) should not exceed:
- 8.050 dollars for individual coverage
- $ 16,100 for family coverage
Individual eligibility
- Other health coverage is not allowed: you may not be covered by any other health plan other than a health plan of limited purpose, such as dental or visual insurance.
- You may not cover you Medicare: you cannot be enrolled in Medicare, part A or B.
- Does not claim as an addict. You cannot be someone else’s dependent on that person’s tax return.
- No FSA’s health with a period. You may not have an account for flexible healthcare consumption with a period.
Note: If you have a health -free health FSA, you qualify for HSA. However, you cannot contribute to both of them the same year.
HSA has made a contribution limit
To maximize the HSA tax benefit, you need to know when contributions reach. Generally, you can contribute to the maturity of the tax return for your HSA. Therefore, you will generally have until April 15 to contribute to the previous year.
Prophet contributions to HSA
If you have not covered you throughout the year, which fulfills the HSA, you can only contribute to the projected amount. This reduces the amount you can contribute to as you can only contribute to a fraction of the annual maximum.
How to make contributions
- Count your months that meet the conditions: List all the months in which you have had the coverage of a health plan that is fulfilling HSA starting at the first day of each month.
- Calculate the fraction: Divide the number of acceptable months into 12.
- Multiply with your annual limit, multiply the fraction with your annual contribution limit for your coverage type (self-self or family).
Last month rule for HSA contributions
Generally, it makes sense to enroll in a high -cost health plan during the open period of enrollment at the latest on December 1st each year to make a maximum contribution to the HSA plan for the year, but you have to continue the plan for at least one calendar month of the year.
There is, however, an exception to this:
- You must be fully covered until December 1st during the year, you make complete contribution until December 31 next year under the HDHP.
- Punishment for early distribution if you interrupt the HDHP coverage during this period in one year, you will become responsible for the excess income tax contributions and be punished by ten percent for such an early distribution.
- The Last-month rule has its testing period in the last month of the tax year and ended twelve months later. For example, for those who use the rule, in December 2024. The period will expand until 31 December 2025.
- This adjustment is calculated on the form 8889, section 3.
HSA Tax Penalities: Avoid these mistakes
HSA is a health savings account that offers excellent tax advantages, and in case of abuse of this benefit, the penalties may follow.
The limit of annual contribution in relation to expenditures
- Each excessive contribution above the annual permissible maximum permissible is susceptible to excise duty of 6%.
- This will be taxed in the year of excessive contribution and then for each next year until such an excess is corrected. In addition, excess contributions are reported as taxable income.
UNAXED USE OF HSA FUNDS
- You also have to pay 20% of the withdrawn amount with the payment of income tax on distribution if you withdraw HSA funds for non -qualified medical costs.
- However, if you are 65 and more, there is an exception. Although you can withdraw funds for any purpose, you still have to pay income tax on the withdrawal amount.
- Once you find out what these penalties are, you will be able to get all the benefits of your HSA with minimal tax costs.
When to contribute to your HSA?
The deadline for contributing to your HSA is:
Individual contributions
- You can contribute to your HSA by April 15, 2025. For the tax year 2024. This deadline matches the usual date of tax submission.
- You may be able to make contributions for HSA for all 2024. Only if you are eligible for the whole year, for example, if you have not had health coverage throughout the year for example, you change health coverage.
- You can contribute to months that you were acceptable during the year, even if you were not acceptable for all 2024.
Contributions to the employer
- Your employer may contribute to your HSA for your tax year 2024 on your behalf. Your employer must also inform you by the HSA commissioner that this contribution is given on your behalf for the 2024 tax year. The contributions will be reported on your W-2 form for 2025.
