The annual contribution limits for health savings accounts keep climbing.
After raising the limits for 2018, the Internal Revenue Service recently announced that it will raise them again for 2019 to adjust for inflation.
Specifically, the new limits apply to folks who are eligible for an HSA and have:
- Self-only health insurance coverage can stash up to $3,500 in an HSA in 2019. That’s up from $3,450 in 2018 and $3,400 in 2017.
- Family coverage can stash up to $7,000 in an HSA in 2019. That’s up from $6,900 in 2018 and $6,750 in 2017.
This is great news for anyone who is able to use an HSA, as this type of account offers a combination of tax-reducing features that is unrivaled, even by tax-advantaged retirement plans like 401(k)s or individual retirement accounts.
What is a health savings account?
An HSA is an account in which you can deposit a certain amount of money each year that you can use to reimburse yourself for eligible medical expenses. You can use an HSA as either a savings account or an investment account — or both.
As we detail in “3 Bold Ways Retirees Can Cut Health Care Costs in 2018,” HSAs offer a trio of tax advantages:
- Contributions can be deducted from your taxes for the tax year during which contributions are made.
- Any gains on your contributions are tax-free.
- Withdrawals are tax-free when used to pay for qualifying health care expenses.
In other words, you will never owe taxes on money that goes through an HSA, provided that you follow the IRS rules for HSAs. Not even a retirement account like a Roth IRA offers that degree of lawful tax avoidance.
Additionally, you do not need to earn income to contribute to an HSA, unlike most retirement accounts.
It’s no wonder that the number of HSA accounts jumped by 16 percent last year.
Who is eligible for a health saving account?
The bad news about HSAs is that not everyone is eligible for one. They’re designed for folks with high-deductible health insurance plans.
- $1,350 for self-only coverage
- $2,700 for family coverage
There are also a few other limitations on who can have an HSA. For example, folks on Medicare are ineligible.
What’s your take on this news? Share your thoughts with us below or over on our Facebook page.