Health Savings accounts are like IRA accounts in that you deduct the amount you put in from your federal income tax (Wisconsin is one of the few states that has not passed this yet). Unlike the IRA, you can take your money out of the HSA at any time as long as it is used to pay for IRS approved medical expenses. These expenses can include IRS approved Chiropractic, Dental, and Vision expenses even if they are not a part of your health insurance plan. Money you take out for such expenses is never subject federal income tax. You can even use the funds to pay for health insurance during periods of unemployment. After age 65 you can even use it to pay long term care insurance (subject to some limitations). All the money in your fund grows tax free. Any moneys used for qualified expenses is simply reported on a form 8889 with your normal annual 1040 or 1040NR.
Here is a chart of the maximum amount you can contribute. This total can come from you, your employer or anyone else as long as the total is not exceeded. As long as you are eligible on the first day of the last month of your tax year (normally 12/1) you can put in the maximum. However this amount can be reduced if you do not remain eligible for the next twelve months. To be eligible you need to keep a qualified HSA Health insurance plan (HDHP) in force. Those over 55 can put in an extra $1,000 per year “catch-up”.
| 2020 | 2021 | |
|---|---|---|
| HSA Maximum Annual Contribution - Individual | $3,550 | $3,600 |
| HSA Maximum Annual Contribution - Family | $7,100 | $7,200 |
| HSA Catch-up age 55+ | $1,000 | $1,000 |
| HDHP Minimum Deductible - Individual | $1,400 | $1,400 |
| HDHP Minimum Deductible - Family | $2,800 | $2,800 |
| HDHP Out-of-Pocket Maximums - Individual | $6,900 | $7,000 |
| HDHP Out-of-Pocket Maximums - Family | $13,800 | $14,000 |