The rules have changed yet again for HSAs, as the IRS reverses a rule instated for 2018 contributions. Your Health Savings Account may be an essential part of your financial affairs, and the following details will help you understand how to save for 2018 and beyond.
The family contribution limit is now $6,900, while it was originally capped at $6,850; this might seem like an insignificant change, but you might have to make an important adjustment, detailed below.
The individual limit is $3,450.
Originally, the IRS calculated an amount before the new tax law was passed in December, then re-adjusted for inflation. The calculation of $6,850 was then changed again, as this created problems for those that had already contributed the maximum amount. If the IRS had kept the initial change, it would have created several obstacles for employers and payroll administrators, in addition to being costly.
What you need to do
If you withdrew from your account after this decision was made in March, you can add it back without taxes or penalties. You will have to repay the $50 as a mistake contribution and attribute it to a ‘mistake of fact due to reasonable cause.’ If you don’t repay it, you can treat it as an excess distribution; under certain circumstances this may be taxable if not repaid.
HSA vs. FSA
Perhaps you don’t have an HSA but the numbers will affect you if you open one this year. An HSA is a health savings account for those that have plans with high deductible. The IRS considers a high deductible that which meets or exceeds $1,350 and a maximum out of pocket cost of $6,650 for individuals. For families, the minimum deductible is $2,700 and the maximum out of pocket expenses is $13,300. HSAs are not to be confused with FSAs, which are not associated with high deductible health plans. In 2018, you can contribute up to $2,650 to help cover medical expenses.