The Internal Revenue Service (IRS) has released the annual contribution limitations for health savings accounts (HSAs) and the minimum deductible amounts and maximum out-of-pocket expense amounts for high-deductible health plans. These limitations are updated annually to reflect cost-of-living adjustments. Business owners should inform employees of the HSA contribution limits increase for 2017.
Employers commonly offer employees HSA contributions as part of their healthcare benefit packages. HSAs are a popular option because of its dual purpose. Employees can utilize HSAs to save for the future or pay for qualified medical expenses tax free.
Under Sec. 223 of Rev. Proc. 2016-28, individuals who participate in a health plan with a high deductible are permitted a deduction for contributions to HSAs set up to help pay their medical expenses. To be eligible to contribute to an HSA you must participate in a high deductible health plan.
The following chart summarizes the contribution and out-of-pocket limits for HSAs and high-deductible health plans for 2017. There was only one minor change between 2016 and 2017.
|HSA contribution limit||Self: $3,350
Family: No Change
|HSA catch up contribution (age 55+)||$1,000||$1,000||No Change|
|HDHP minimum deductible||Self: $1,300
|HDHP maximum out of pocket||Self: $6,550
Employers should remind employees who are contributing to or using their HSA:
- They have until April 15, 2018 to make contributions for the 2017 tax year.
- Withdrawing from their HSA for nonqualified purposes is subject to income tax.
- Nonqualified withdrawals are also subject to a 20% tax penalty unless an exception applies.
The professionals in our office can clarify any questions you may have on HSAs. Call on us today.