The Health Savings Account (HSA) contribution limits will increase from $3,850 to $4,150 for self-only coverage and from $7,750 to $8,300 for family coverage in 2024. To contribute to an HSA, an individual or family must be enrolled in an HSA-eligible High Deductible Health Plan (HDHP).
HSAs, also known as medical IRAs, offer a triple tax benefit: an immediate Federal tax deduction, tax-deferred growth, and tax-free distributions for qualified medical expenses. In addition, HSA account owners who are over age 65 can take distributions penalty free, although still subject to income taxes, once they are eligible for and enroll in Medicare. HSA distributions that are used for ineligible expenses (non-qualified medical expenses) by account owners under age 65 are subject to both ordinary income taxes and a 20% IRS penalty.
For some, a high-deductible health plan combined with a health savings account may be a good option. Of course, it is important for everyone to review their individual circumstances to determine the health plan that best fits their needs. Factors to consider include the time of enrollment in the eligible plan, current age, frequency of doctor’s visits, medications, and funding amounts.