IRS Announces Record 2024 HSA Contribution Limits
By HealthPriceCompare - June 6, 2023
The Internal Revenue Service (IRS) recently announced a record change to the amounts that can be contributed to a health savings account (HSA) in 2024.
Starting in 2024, the maximum HSA contribution for self-only coverage will increase to $4,150, a 7.8% increase from 2023's limit of $3,850. For a family plan, the maximum contribution is now $8,300, a 7.1% increase from 2023's limit of $7,750.
This increase was driven by the impact that inflation continues to have on the finances of Americans and marks the largest increase to contribution limits ever approved by the IRS. In 2022, the contribution limit was up to $3,650 for individuals and up to $7,300 for family coverage. In 2023 by comparison, the contribution limit for individuals increased 5.4% up to $3,850 and 6.1% up to $7,750.
For the first time since their creation in 2003, this change will even allow some participants to contribute over $10,000 tax free each year. HSA catch-up contributions allow individuals who are 55 years of age or older to contribute additional funds to their HSA above the regular contribution limits. These catch-up contributions are designed to help individuals save more for healthcare expenses as they approach retirement.
For participants who meet the catch-up contribution requirements, this will allow them to contribute an extra $1,000 on top of the regular limits, meaning a married couple who meet this age threshold could ultimately contribute $10,300 to their HSA in 2024. This will be impactful for those who are 55 and older, participating in a high-deductible health plan and inevitably need to spend more on medical care.
Catch-up contributions are optional, not mandatory, and the decision to contribute more should be based on your financial situation and healthcare needs. Catch-up contributions also provide additional tax advantages, since these contributions are tax-deductible and withdrawals for qualified medical expenses are tax-free. In addition to these advantages, HSA's also have three additional features that healthcare consumers should know.
The first is that unlike a flexible spending account, HSA funds are enrollee owned and do not need to be spent within a specified time-period. The second is the absence of required minimum distributions, a requirement of many tax-free investment vehicles. The third is the ability to use HSA funds to pay Medicare Parts B & D premiums which is an amount that for many can be considerable.
Finally, there is one little understood aspect of HSAs that make them more than just a way to pay for medical expenses with pre-tax dollars. HSA distributions do not have to occur at the same time the account holder incurs a qualified medical expense.
This means that an enrollee can pay for medical expenses using after-tax income thus allowing their HSA funds to continue growing tax free. Down the road, the account holder can still reimburse themselves for the care that was previously paid with after-tax dollars.
It's important to note that these contribution limits are subject to change by the IRS each year. Be sure to check for any updates or changes to the limits before making additional contributions to your HSA.
And be sure to take the right steps to save the funds you have contributed to your HSA by using HealthPriceCompare to search for providers based on insurance contracted and discounted cash prices for medical services. Just because you are now able to save more for healthcare doesn't mean you need to spend more on healthcare.