Health Savings Account (HSA) Contributions

Tax Strategy
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Retirement
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Updated
2/18/2023

How It Works

The Health Savings Account (HSA) strategy is a tax deduction for eligible individuals who contributed to a qualified savings account for medical expenses. Qualified medical expenses include deductibles, copayments, coinsurance, and other medical expenses. The contributions are deductible, invested within the HSA, and can be withdrawn tax-free when used to pay for qualified medical expenses.

Eligibility

Confirm these points before using this strategy:

  • You’re enrolled in a High-Deductible Health Plan (HDHP).
  • You haven’t received Veterans Affairs (VA) benefits within the prior three months, except for preventive care, unless you have a disability rating from the VA.
  • You’re not enrolled in Medicare, TRICARE or TRICARE for Life.
  • You’re not enrolled in a Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA).

Action Items

To use this strategy:

  • Establish an HSA through your employer or participating financial institution.
  • Make HSA contributions up to the annual contribution limit.

Limits (2023)

The maximum annual contribution for 2023 is:

  • $3,650 for individual HSAs
  • $7,750 for family HSA

An additional $1,000 catch-up contribution is allowed for taxpayers age 55 and older.

IRC References

I.R.C § 223 - In the case of an individual who is an eligible individual for any month during the taxable year, there shall be allowed as a deduction for the taxable year an amount equal to the aggregate amount paid in cash during such taxable year by or on behalf of such individual to a health savings account of such individual.

This content is for informational purposes only and does not constitute legal, business, or tax advice. You should consult your own attorney, business advisor, or tax advisor regarding matters mentioned in this post. We take no responsibility for actions taken based on the information provided.

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