IRS Increases HSA Limits for 2022 by Adam Cohen, CPA

Posted on June 09, 2021 by Adam Cohen

Individuals participating in high-deductible health plans (HDHPs) will be able to contribute more of their pre-tax earnings to health savings accounts (HSAs) in 2022 and yield the related tax and savings benefits.

The IRS recently announced it will increase the annual HSA contribution limits that qualify for a full tax deduction in 2022 to $3,650 (up for $3,600 in 2021).  For family plans, the annual limitation on deductions will rise to $7,300 (up from 7,200 in 2021).

To qualify for an HSA, taxpayers must participate in “high-deductible” health plans, which for 2022 are defined as those with:

In addition to providing plan participants with reduced insurance premiums, high-deductible health plans also allow taxpayers to enjoy the triple-tax benefits of HSAs. This means that 1) contributions are made with pretax dollars that reduce one’s taxable income, 2) invested contributions, interest and earnings grow tax free, and 3) withdrawals may be taken free of tax when used to pay for qualifying medical expenses, including out-of-pocket deductible costs. Moreover, taxpayers may exclude from their gross income any HSA contributions made by their employers, and they may keep their HSAs as their own even if they change employers or leave the workforce.

Over the past few years, the IRS has greatly expanded the range of medical and non-medical expenses that qualify for tax-free withdrawals from HSAs. Today, taxpayers can use HSA savings to pay for acupuncture, weight-loss programs, psychiatric and psychologic care, durable medical equipment, and certain over-the-counter medications and personal-care items, as well as the costs for continuation of health care coverage under COBRA and premiums paid for long-term-care insurance. Using HSA funds for anything other than a qualifying medical expense will be subject to tax and a penalty.

Once taxpayers enroll in Medicare, they may no longer contribute to their HSAs, which, by that point, may have substantial balances. Withdrawals taken for qualifying medical expenses (including Medicare deductibles and copays) will continue to be free of tax. However, beginning at age 65, taxpayers may also use their HSA like they use their retirement savings and make taxable withdrawals for non-qualifying medical expenses without incurring any penalties.

About the Author: Adam Cohen, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency while complying with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or