Health Savings Accounts (HSAs) are established for the purpose of paying qualified medical expenses for eligible individuals covered under high deductible health plans (HDHP). HDHP’s are generally exempt from taxation until the account ceases to be an HSA. HSAs provide individuals with more flexibility on how to spend their health care dollars.
To qualify as an eligible individual, the following tests must be met:
- Covered under a high deductible health plan
- Not covered under any other health plan not eligible as a high deductible health plan
Contributions made to an HSA are deductible. Distributions can be used to pay qualified medical expenses for an account beneficiary, spouse and dependents. For tax year 2013, the maximum annual contribution limit is $3,250 for self-only coverage and $6,450 for family coverage. These annual contribution limits apply whether the contributions are made by an employee, an employer, a self-employed individual or a family member. For individuals maintaining more than one HSA account, the annual limit is based on the aggregate total of all accounts.
High Deductible Health Plan (HDHP)
Health plan that has an annual deductible not less than $1,250 for self-only coverage and $2,500 for family coverage. In addition, the total annual out-of-pocket expenses do not exceed $6,250 for self-only coverage and $12,500 for family coverage. The above limits have increased over the tax year 2012 for changes in the cost-of-living.
2014 Annual Limit Projections
Maximum annual contribution limit of $3,250 for self-only coverage and $6,450 for family coverage to remain unchanged from tax year 2013. HDHP annual deductible is projected to remain unchanged from tax year 2013; therefore, not less than $1,250 for self-only coverage and $2,500 for family coverage. The total annual out-of-pocket expenses projected to increase to a maximum of $6,350 for self-only coverage and $12,700 for family coverage.
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