» HSA Contribution Limits Increase in 2014

HSA Contribution Limits Increase in 2014

Soon, you’ll be able to shelter even more money from taxes thanks to your HSA.  That means you’ll not only pay less in taxes on the money you already have, but you’ll also have the chance to get more tax-free earnings.  The IRS recently issued inflation-adjusted numbers for 2014 HSA contribution limits, along with minimum deductibles and maximum out-of-pocket limits.

 

Higher HSA Contribution Limits

 

In 2013, you can only contribute up to $3,250 for an individual HSA.  Next year, you can deposit up to $3,300.  For a family HSA, the maximum contribution is increasing from $6,450 this year to $6,550 next year.

 

And, there’s no change in the catch-up contributions if you’re at least age 55.  You may contribute an additional $1,000 this year and another $1,000 again next year.  All money you deposit in an HSA can be permanently sheltered from taxes if you spend it on qualified health care.  Click here to see a list of the kinds of health-related costs you can use HSA funds to cover.  You may be surprised by things like travel expenses.

 

HSA Deductibles and Out-of-pocket Limits

 

In 2014, HSA-qualified policies must have the same minimum deductibles as they do this year.  For an individual, that’s $1,250 and for a family, it’s $2,500.  That’s the minimum, so certain HSA-qualified policies may have higher limits.

 

The highest out-of-pocket expenses allowed this year, including the deductible, are $6,250 for individual coverage and $12,500 for family coverage.  Next year, that’s increasing to $6,350 for individuals and $12,700 for families. Our instant quotes always show you the maximum out-of-pocket per year under Plan Details since that’s so important to know.

 

HSA Tax-sheltered Assets Remain Available for Medical Costs

 

Unlike IRA funds, HSA money can be withdrawn and spent on dental and health care before you reach age 59 ½.  Another big difference is that you don’t have to withdraw HSA money at a certain age like you do IRA money.  You can leave it invested earning tax-free interest or dividends.

 

Some Changes I’d Like to See

 

I’d like to see these contribution limits raised substantially.  The more we can encourage people to save for future medical expenses, the stronger our society will be.  I also believe that people should be able to pay for their health insurance from their HSA. Currently, people who purchase their own health insurance are penalized in comparison to people who receive insurance from an employer, because the individual must pay taxes on that expense.  If an employer provides this as a benefit, it is tax-free.

 

If any tax breaks are to be given for purchasing health insurance, it is individuals who should be favored, not corporations.  People who spend their own money, on health insurance or medical expenses, always pay more attention than bureaucrats and politicians spending the taxpayer’s money. And it is greater attention to costs, from the consumer, that can drive down healthcare costs.

 

So I believe tax policies should promote individual responsibility and decision-making. What do you think?

 

This entry was posted on Tuesday, May 28th, 2013 at 10:27 am and is filed under Health Savings Accounts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

20 Responses to “HSA Contribution Limits Increase in 2014”

  1. Alison Says:

    I was under the impression (and I think this was true a few years ago) that your contributions could not exceed the deductible. But when I got a new HSA last year, I was surprised that I could only contribute $3100 even though I have a $5500 deductible. AT THE VERY LEAST, an insured should be able to squirrel away the deductible in an HSA. I would also like to see an allowance of an additional $1,000-$2,000 allowed for expenses not covered under major medical insurance, such as vision and dental care.

  2. Fred Adams Says:

    Alison,

    Your HSA contribution can not be more than the amount allowed by the IRS each year. While this number does go up slightly each year to adjust for inflation, an individual has never been able to contribute more to an HSA in any one year than they can in 2012. I believe your confusion may be a result of the fact that high deductible health plans are allowed to have deductibles higher than the allowable HSA contribution each year and still be HSA-qualified policies. That has always been the case since HSAs first came to be in 2004.

    If you are over the age of 55, you are allowed an additional $1000 catch up contribution each year, which would get you to to that $5500 deductible. While I certainly agree that it would be great if we could all contribute an amount equal to our deductible (I personally carry an $11,000 family deductible, and am limited to a $6250 HSA contribution), that is just not how the laws were set up.

    The logic behind allowing higher deductibles was that would allow consumers to keep their premiums much lower than if the highest deductible allowed for an individual matched the $3100 contribution limit. If you stay healthy one year and do not use funds in your HSA, you could have enough money in your HSA to cover your entire deductible as soon as January 1 of the year after you first fund your account.

    I hope this helps,

    Fred Adams
    The HSA Expert

  3. Scott Says:

    I just got notified that my deductible for plans 860/865 will increase from $3000 to $3125. I understand the tax saving, I also understand that as the deductibles are raised the exposure by the insurance company is reduced. To me this looks like “moving the goal posts while the game is still going on”. For those of us who can’t afford to fund an HSA as quickly as you do, this is the same as raising my premium.

  4. Fred Adams Says:

    Scott,

    I am sorry to hear your deductible, as well as many others, are increasing. I certainly agree with both of your comments that this equates to moving the goal line (as a huge UGA football fan, I appreciate how much difference even a small change can make) as well as raising your deductible is akin to increasing your premium, or at least your out of pocket.

    One suggestion I would make is to schedule an appointment to speak to one of our expert advisors, to review what your best options may be moving forward in the new world of health insurance exchanges and market places. In many cases, reducing your taxable income by as little as one dollar can make a substantial difference in the amount of tax credits you may be eligible for next year. I’ve seen some cases where a client fully funding their HSA account can actually result in the client getting more money in tax breaks than they receive in tax credits. If you can deposit $3150 in your HSA account (you have until April 15, 2105 to count your contribution and it count as a 2014 contribution), and can lower your insurance premiums by $3200 or more via tax credits, then funding an HSA makes all the sense in the world.

    Any of our advisors would be happy to assist you in exploring any of these options that may apply to your particular situation. Not all clients are eligible for tax credits or close enough to a threshold that would allow those credits to be as large as mentioned above, but we are definitely seeing this in many cases. Given this new, additional benefit, the potential impact of having an HSA-qualified health plan has never been great than it will be in 2014.

    Thanks for your feedback, and please let us know how we can be of further assistance. We’re here to help.

  5. Jeff Says:

    Effective 1/1/2014 my employer no longer provides group health insurance. I purchased an H.S.A. qualified individual plan and I wanted to know if my employer can continue to withhold my personal H.S.A. contributions on a pretax basis? If not can I deduct the contributions when I file my personal 2014 tax return even if I do not itemize?
    Thanks.

  6. admin Says:

    Hi Jeff!

    We may need a bit more information, but here’s what we know based on your comment:

    It’s up to your HR department at your company if they can put your HSA funds into your account before taxes. You should talk to the manager and see what their policy is.

    If you and only you contribute funds to your HSA, then you can claim the deduction on your taxes without itemizing. If your company also contributes funds, then that makes this situation a little difficult (and we can help you figure out that answer).

    Thanks!

  7. Fred Adams Says:

    Jeff,

    I think a more direct answers to your question would be:

    YES, your employer can make pre-tax contributions to your HSA account for you. This is typically done via a section 105 plan, and is considered a tax deduction for the business making the contribution.

    If you make the contribution post tax, you are then allowed to write off the entire contribution on your 2014 tax return. This will be a line item that appears between your gross income and adjusted gross, meaning you will not pay any income tax on this contributions. You would have taxes withheld from your payroll check throughout the year, but would get those taxes back as part of your tax return at year end.

    Best regards, Fred

  8. Joseph Says:

    Fred,
    I am confused by a figure in your first response to Alison on June 11th, 2013: Why would your family contribution limit only be $6250 if there are no income limits on HSAs and the article states that the contribution limits are $6450 for 2013 and $6550 for 2014? What makes your personal family contribution limit $200 or $300 less than the IRS limit?

    Thanks, Joseph

  9. Fred Adams Says:

    Joseph,

    My comment above contained a typo. Your are correct that the annual contributions limits were $6450 for a family in 2013, and $6550 for 2014. The only thing that would cause that amount to be pro-rated would be if you were to cancel your HSA-qualified health plan before the end of the year, in which case your contribution would be pro-rated based on the number of full months you maintained qualified coverage.

    Thank you for pointing out the typo,

    Fred

  10. Marty Says:

    We had a Family HSA plan for 2013, both over 55 yrs. and contributed the full contribution ($7450) early in year. Spouse applied for Medicare June 2013. Will the tax deductible contribution be pro-rated by 6 months? Do some of the contributions need to be withdrawn? How much of the contribution will be allowed for tax credit?

    Also for 2014 do we need to change the plan to Single?

    Thank you, Marty

  11. admin Says:

    Hi Marty,

    We’ve included your questions and broke down the answers for you…

    We had a Family HSA plan for 2013, both over 55 yrs. and contributed the full contribution ($7450) early in year. Spouse applied for Medicare June 2013. Will the tax deductible contribution be pro-rated by 6 months? If you do not have at least two family members on an HSA-qualfiied health policy at the end of the year, your contribution is pro-rated based on the number of full months each person maintained qualified coverage. In your case, you would have been entitle to the family contribution ($6450) for 5/12ths of the year ($2687.50) and an individual contribution ($3250) for 7/12ths of the year ($1895.83).

    Since you were both over the age of 55, you would have been allowed to two $1000 catch up provisions, provided you had two separate HSA accounts (as you are only allowed to make one catch up contribution per HSA account, which must be held in the name of the individual making the catch up contribution). This contribution is not pro-rated. If you happened to have had two separate HSA accounts in 2013 (one in each spouse’s name), then you would be allowed two $1000 contributions, for a total annual contribution of $6583.33. If you only had one HSA account, your 2013 contribution limit would be $5583.33.

    Do some of the contributions need to be withdrawn? Yes, you will need to remove any excess contributions. Since many banks handle the process differently, you should contact your HSA administrator to find out their procedure for handling this process.

    How much of the contribution will be allowed for tax credit? $6583.33 if you had an account in each spouses’ name, or $5583.33 if you only had one HSA account.

    Also for 2014 do we need to change the plan to Single? There is no additional action required. Starting this year, just make sure not to exceed the individual contribution limit, which is for $4300 individuals over the age of 65.

  12. Tom Says:

    My wife and I qualify and opened an HSA in 2/2014. Can we take an HSA tax reduction for 2013 taxes (as a catch up), even though we did not qualify in 2013?

    Thanks!

    Tom

  13. Fred Adams Says:

    Tom,

    If you did not open your HSA account before the end of 2013, you are not eligible to make an HSA contribution for 2013, even if you had your qualified high deductible health plan in place prior to December 1, 2013.

    Hope that helps,

    Fred Adams
    The HSA Expert

  14. Jerry Says:

    I turn 55 later this year, am I eligible for $1,000 Catch-Up?

  15. Fred Adams Says:

    Jerry,

    YES, as soon as you turn 55, you will be able to make the full $1000 catchup contribution each year as long as you maintain a qualified high deductible health plan.

    Best regards,

    Fred Adams
    The HSA EXpert

  16. Damon Says:

    Tom, If me and my wife signed up for a family HDHP on Jan 1st 2014, we are both over 55yrs old. We recently opened a family HSA account at a local Credit Union, now we want to fund it out of my IRA (I rolled my 401k into this IRA).

    From what I have read in the questions and answers on this page, there is a limit of $7550 into our HSA ($6550 + one persons Catch up $1000). Can we open another HSA and split the Family max contribution of $6550, so $3275 and $1000 ($4375) for each account out of my IRA? Or do we have to put $7550 in one HSA and $1000 into a new HSA for my wife? Our Financial Advisor says we can only do One Contribution our of my IRA’s to fund These HSA accounts. What are our options?

    PS. My wife has always been a homemaker throughout our marriage so all of our retirement account are in my name. She does not have any Retirement funds.

  17. Fred Adams Says:

    Damon,

    Your financial advisor is correct that you can only make one roll over contribution from an IRA to an HSA, and that you are only allowed one catch up contribution per HSA account. However, since both you and your wife are over 55, you could open two HSA accounts (one in each spouses’ name, as an HSA account is only allowed to have one owner). With two accounts, you would both be eligible for the $1000 catchup contribution, allowing you to contribute a combined $8550 in to the two accounts this year.

    You would not to put at least $1000 in each account (the amount of the catchup contribution). The remaining $6550 could be deposited any way you wanted, all in one account, split evenly, or any combination thereof. Your wife won’t be able to fund her account with a rollover from your IRA, but would be able to deposit other funds in to her HSA.

    What I recommend for most couple in this situation is to make one HSA account an investment account (such as HSA Bank), and contribute $7550 to that account. With the second account, I recommend a free, savings account (such as First American Bank). Since you can use funds from either account for either spouse, this approach makes it easy to access to cover a minimal amount of funds in your HSA each year, without the need to liquidate any investments.

    I hope that helps.

    Fred Adams
    The HSA EXpert

  18. Tonya Says:

    Spouse is 100% disabled due to military service and gets VA coverage. If the owner of the HSA adds her disabled spouse to her plan, can she use her HSA to pay for costs VA does not cover?
    Is her maximum annual contribution amount based on her only or is it the owner plus the disabled spouse for a maximum contribution amount of $7500.00

  19. Wiley Long Says:

    Tonya, I apologize for the delayed response. If the spouse is actually added to the plan, the maximum contribution limit would be the family limit of $6,550 for 2014 (and an extra $1,000 if over age 55). The spouse, however, does not need to be added to the plan to use HSA funds to pay for services not covered by the VA (although if not added, the maximum contribution would be limited to the individual limit of $3,300 + $1,000 if over age 55). As long as HSA funds are used for HSA-qualified expenses, the funds remain tax-free. You can view our list of HSA-qualified expenses on our website: http://www.hsaforamerica.com/qualified-expenses-list.htm

  20. Lynne French Says:

    Hello – will I be able to use HSA funds to pay for:

    1. Long term care monthly premiums (we already have LTC insurance)?
    2. Medi Gap insurance premiums?
    3. Medicare premiums?

    Thank you.

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