Hsa Limits

By Author: Roger Henkin
Total Articles: 13
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Health Savings Accounts-Definition and Limits

Health savings accounts, or HSAs, are tax deferred savings accounts available to citizens of the US who are enrolled in high deductible health plans (HDHP's). The funds deposited are tax deferred (no federal income tax) when they are deposited and are earmarked for medical expenses. Here are some things you may want to know.

People under the age of 65 that are enrolled in a qualifying HDHP can open an HSA at any time. You may not have secondary coverage that is not a qualified HDHP. However, disability, dental and vision care is allowable.

A high deductible health plan is one that has the following deductible/out of pocket limits as of the 2008 tax year:

ï Single person minimum deductible is $1100.

ï Family minimum deductible is $2200

ï Single person maximum out of pocket expenses are $5600

ï Family maximum out of pocket expense are $11200

For the calendar year 2008, the limits have remained the same.

Individuals meeting these requirements may open an HSA any time ...
... and make deposits. There are also limits on what you can deposit into an HSA.

For the 2008 tax year, the maximum amount you can deposit is $2900 as a single person and $5800 for a family.

These deposited funds are the property of the account holder and can be made by an individual or through payroll deduction with an employer.

Taxpayers over the age of 55 can deposit an additional $800 annually.

Funds may be withdrawn without penalty for medical expenses that are qualified AFTER the HDHP deductible is met. Funds that are not used or withdrawn within the year carry over to the next year.

Qualified withdrawals can be made in any of several ways. Some HSA plans utilize a debit card while some issue checks to the account holder for this purpose. Other plans will reimburse the insured person like many standard health insurance plans.

You, as the policyholder, are required to keep accurate, adequate documentation of all withdrawals from the HSA. Not keeping good records can lead to the IRS deeming withdrawals as unqualified and impose a penalty.

Any withdrawals for non-medical reasons are subject to Federal income tax plus a penalty of at least 10%. Persons over the age of 65 or disabled at the time of the withdrawal are exempt from these penalties.

Some qualified withdrawals include:

ï Coinsurance.

ï Deductibles.

ï Dental care.

ï Vision care.

ï Durable medical equipment (wheelchairs, walkers, etc...)

ï Over-The-Counter (OTC) medications

How and where to open an HSA

You may open an HSA on your own or set one up with your employer.

Your employer may offer an HSA eligible option. To find out, see your human resources director.

HSA's can lower your premiums significantly. Some employers may actually fund part of the account for you or offer a matching contribution like some 401(k) plans do.