Higher Limits for HSA Contributions in 2014

The Internal Revenue Service has announced that higher limits will be allowed on contributions to health savings accounts (HSAs) and for out-of-pocket costs under high-deductible health plans (HDHPs) linked with them. A chart comparing the costs between 2013 and 2014 is shown below. 

Contribution and Out-of-Pocket Limits for Health Savings Accounts and for High-Deductible Health Plans
	For 2014	For 2013
HSA contribution limit (employer + employee)	Individual: $3,300 Family: $6,550	Individual: $3,250 Family: $6,450	Individual: +$50 Family: +100
HSA catch-up contributions (age 55 or older)*	$1,000	$1,000	No change**
HDHP minimum deductibles	Individual: $1,250 Family: $2,500	Individual: $1,250 Family: $2,500	No change
HDHP maximum out-of-pocket amounts (deductibles, co-payments and other amounts, but not premiums)	Individual: $6,350 Family: $12,700	Individual: $6,250 Family: $12,500	Individual: +$100 Family: +$200
* Catch-up contributions can be made any time during the year in which the HSA participant turns 55. ** Unlike other limits, the HSA catch-up contribution amount is not indexed; any increase would require statutory change.

The increases from 2013 to 2014 are not as high as the increases between 2012 and 2013, which indicates a lower inflation rate. The contribution limit increases from 2012 to 2013 were $150 for individual coverage and $200 for family plans. The maximum out-of-pocket increases were $200 for individuals and $400 for families. And in case you were not aware, they are penalties for using your HSA funds for nonmedical expenses. If you are under the age 65 (unless completely disabled) and have used your HSA funds for nonqualified medical expenses, you will face a penalty of 20% of the funds used for that nonqualified expense. Funds spent on nonqualified expenses are also subject to income tax.

If you have an adult child on your healthcare plan, you may not be allowed to use HSA funds to pay for that child’s medical expenses. A good rule of thumb to follow is that if you cannot claim the child on your tax return, then you cannot use your HSA funds for that child either. According to the Internal Revenue Service, a dependent is a qualifying child who has the same principal residence as the taxpayer for more than half of a taxable year, has not provided more than one half of his or her own support during the taxable year, and is not yet 19 (for students, 24) at the end of the tax year, or the child is permanently and totally disabled.

If you have any questions about your Health Savings Account, please contact us!

 

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 www.cpamcdaniel.com

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment).