IRS Raises Health Savings Account Limits for 2018

Source: AccountingWEB

May 8, 2017

By Jason Bramwell

The annual limit on deductible contributions to a health savings account (HSA) go up by $50 in calendar year 2018 for individuals with self-only coverage, according to the IRS. 

The IRS issued Revenue Procedure 2017-37 on May 4, which provides the 2018 inflation-adjusted deduction limitations for annual contributions made to an HSA under Code Section 223.

For 2018, the annual contribution limitation for a person with self-only coverage under a high-deductible health plan is $3,450, up from $3,400 in calendar year 2017.

The annual limit on deductible contributions for a person with family coverage under a high-deductible health plan will increase by $150 – from $6,750 in 2017 to $6,900 in 2018. 
According to the IRS, a high-deductible health plan is defined under Section 223(c)(2)(A) as a health plan with an annual deductible that is “not less than $1,350 for self-only coverage or $2,700 for family coverage.” Both of those amounts increased from 2017.

Annual out-of-pocket expenses – such as deductibles, copayments, and other amounts that do not include premiums – will have a maximum limit of $6,650 for individuals and $13,300 for families, which also increased from 2017.

According to IRS Publication 969, the benefits of an HSA include: 

  • You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040.
  • Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.
  • The contributions remain in your account until you use them.
  • The interest or other earnings on the assets in the account are tax-free.
  • Distributions may be tax-free if you pay qualified medical expenses.