IRS Announces 2018 HSA Contribution Limits by Adam Cohen, CPA

Posted on June 05, 2017 by Adam Cohen

Taxpayers who participate in high-deductible health insurance plans will receive a minimal increase in the amount of pre-tax dollars they may contribute from payroll deductions into Health Savings Accounts (HSAs) in 2018.

The IRS recently announced that the annual HSA contribution limit in 2018 will be $3,450, compared with $3,400 in the current year. For family plans, the annual limitation on deductions will increase in 2018 to $6,900, from the current amount of $6,750.

To qualify for an HSA, taxpayers must participate in high-deductible health plans, which for 2018 are broadly defined as those with minimum annual deductibles of $1,350 for individuals, or $2,700 for family coverage, and those in which deductibles plus annual out-of-pocket expenses do not exceed $6,650 for self-coverage or $13,300 for families.

In addition to providing participants with lower insurance premiums, high-deductible health plans also allow taxpayers to receive triple tax benefits from HSAs. More specifically, taxpayers may make contributions to HSAs with pre-tax dollars, allow those contributions to grow tax-free and withdraw funds tax-free for medical expenses, including out-of-pocket deductibles. Moreover, HSA balances roll over from year-to-year allowing taxpayers to build a sizable financial cushion to pay for the rising costs of medical care, prescriptions drugs and long-term care in retirement.

The U.S. House of Representatives recently and narrowly approved a new healthcare plan that calls for expanding the use of HSAs. Whether this Trumpcare plan passes the Senate or if the U.S. continues an existing of modified Obamacare system is unknown. However, it may be safe to assume that HSAs will be an important component in the U.S. healthcare system in the future.

About the Author: Adam Cohen, CPA, is an associate director in the Tax Services practice of 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 office at (954) 712-7000 or via e-mail