IRS Raises HSA Contribution Limits in 2020 by Adam Cohen, CPA
Posted on July 26, 2019
by
Adam Cohen
Taxpayers who participate in high-deductible health insurance plans will be able to save a little more in their Health Savings Accounts (HSAs) in 2020, when contribution limits will increase to $3,550 for individuals or $7,100 for family coverage, up from their 2019 limits of $3,500 and $7,000 respectively.
This 1.4 percent increase represents significant benefits to qualifying participants, who can use pre-tax dollars to make HSA contributions via salary deferral, much in the same way that employees contribute to 401(k) plans. Unlike 401(k)s, however, HSA do not impose age restrictions on withdrawals. Rather, account owners can tap into their HSAs at any time and take withdrawals tax-free when used to pay for qualifying physical or mental medical expenses, including those not covered by health insurance. As an added benefit, any money that goes unused in an HSA rolls over year-to-year and grows tax-free to provide account owners with savings to cover the rising costs of medical care, prescriptions drugs and long-term care during their later retirement years.
To be eligible to contribute to an HSA in 2020, a taxpayer must participate in a high deductible health insurance plan with an annual deductible of $1,400 or more for self-only coverage or $2,800 for family coverage, up from $1,350 and $2,700, respectively, in 2019. The maximum out-of-pocket medical expenses an HSA may cover in 2020 is $6,900 for individuals or $13,800 for family coverage.
About the Author: Adam Cohen, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via e-mail at info@bpbcpa.com.
Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.
← Previous
