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IRS Releases 2021 Amounts For Health Savings Accounts

The IRS recently released the 2021 inflation-adjusted amounts for Health Savings Accounts (HSAs).

HSA basics

An HSA is a trust created or organized exclusively for the purpose of paying the “qualified medical expenses” of an “account beneficiary.” An HSA can only be established for the benefit of an “eligible individual” who is covered under a “high deductible health plan.” In addition, a participant can’t be enrolled in Medicare or have other health coverage (exceptions include dental, vision, long-term care, accident and specific disease insurance).

In general, a high deductible health plan (HDHP) is a plan that has an annual deductible that isn’t less than $1,000 for self-only coverage and $2,000 for family coverage. In addition, the sum of the annual deductible and other annual out-of-pocket expenses required to be paid under the plan for covered benefits (but not for premiums) cannot exceed $5,000 for self-only coverage, and $10,000 for family coverage.

Within specified dollar limits, an above-the-line tax deduction is allowed for an individual’s contribution to an HSA. This annual contribution limitation and the annual deductible and out-of-pocket expenses under the tax code are adjusted annually for inflation.

Inflation adjustments for 2021 contributions

In Revenue Procedure 2020-32, […]

By Linkenheimer LLP|May 27th, 2020|hsa, irs, New Tax Laws|0 Comments

IRS Extends Some (But Not All) Employee Benefit Plan Deadlines

The IRS recently issued Notice 2020-23, expanding on previously issued guidance extending certain tax filing and payment deadlines in response to the novel coronavirus (COVID-19) crisis. This guidance applies to specified filing obligations and other “specified actions” that would otherwise be due on or after April 1, 2020, and before July 15, 2020. It extends the due date for specified actions to July 15, 2020.

Specified actions include any “specified time-sensitive action” listed in Revenue Procedure 2018-58, including many relating to employee benefit plans. The relief applies to any person required to perform specified actions within the relief window, and it’s automatic — your business doesn’t need to file any form, letter or other request with the IRS.

Filing extensions beyond July 15, 2020, may be sought using the appropriate extension form, but the extension won’t go beyond the original statutory or regulatory extension date. Here are some highlights of Notice 2020-23 specifically related to employee benefit plans:

Form 5500. The relief window covers Form 5500 filings for plan years that ended in September, October or November 2019, as well as Form 5500 deadlines within the window as a result of a previously filed […]

By Linkenheimer LLP|April 22nd, 2020|business, contributions, employer, hsa, retirement|0 Comments

Setting Up a Health Savings Account for Your Small Business

Given the escalating cost of employee health care benefits, your business may be interested in providing some of these benefits through an employer-sponsored Health Savings Account (HSA). For eligible individuals, HSAs offer a tax-advantaged way to set aside funds (or have their employers do so) to meet future medical needs. Here are the key tax benefits:

Contributions that participants make to an HSA are deductible, within limits.
Contributions that employers make aren’t taxed to participants.
Earnings on the funds within an HSA aren’t taxed, so the money can accumulate year after year tax free.
HSA distributions to cover qualified medical expenses aren’t taxed.
Employers don’t have to pay payroll taxes on HSA contributions made by employees through payroll deductions.

Who is eligible?

To be eligible for an HSA, an individual must be covered by a “high deductible health plan.” For 2019, a “high deductible health plan” is one with an annual deductible of at least $1,350 for self-only coverage, or at least $2,700 for family coverage. For self-only coverage, the 2019 limit on deductible contributions is $3,500. For family coverage, the 2019 limit on deductible contributions is $7,000. Additionally, annual out-of-pocket expenses required to […]

By Linkenheimer LLP|October 14th, 2019|business, Health care, hsa|0 Comments

Is an HSA Right for You?

To help defray health care costs, many people now contribute to, or are thinking about setting up, Health Savings Accounts (HSAs). With these accounts, individuals can pay for certain medical expenses on a tax advantaged basis.

The basics

With HSAs, you take more responsibility for your health care costs. If you’re covered by a qualified high-deductible health plan, you can contribute pretax income to an employer-sponsored HSA — or make deductible contributions to an HSA you set up yourself.

You own the account, which can bear interest or be invested. It can grow tax-deferred, similar to an IRA. Withdrawals for qualified medical expenses are tax-free, and you can carry over a balance from year to year. So, unlike Flexible Spending Accounts (FSAs), undistributed balances in HSAs aren’t forfeited at year end.

For the 2019 tax year, you can make a tax-deductible HSA contribution of up to $3,500 if you have qualifying self-only coverage or up to $7,000 if you have qualifying family coverage (anything other than self-only coverage). If you’re age 55 or older as of December 31, the maximum contribution increases by $1,000.

To be eligible to contribute to an HSA, you must have a […]

By Linkenheimer LLP|June 24th, 2019|hsa|0 Comments

Do You Know the ABCs of HSAs, FSAs and HRAs?

There continues to be much uncertainty about the Affordable Care Act and how such uncertainty will impact health care costs. So it’s critical to leverage all tax-advantaged ways to fund these expenses, including HSAs, FSAs and HRAs. Here’s how to make sense of this alphabet soup of health care accounts.

HSAs

If you’re covered by a qualified high-deductible health plan (HDHP), you can contribute pretax income to an employer-sponsored Health Savings Account — or make deductible contributions to an HSA you set up yourself — up to $3,450 for self-only coverage and $6,900 for family coverage for 2018. Plus, if you’re age 55 or older, you may contribute an additional $1,000.

You own the account, which can bear interest or be invested, growing tax-deferred similar to an IRA. Withdrawals for qualified medical expenses are tax-free, and you can carry over a balance from year to year.

FSAs

Regardless of […]

By Linkenheimer LLP|June 26th, 2018|affordable care act, Health care, hsa|0 Comments

New Health Saving Account Limits for 2018

The Internal Revenue Service released the 2018 inflation-adjusted limitations for health savings accounts.

In Revenue Procedure 2017-37, the IRS said the annual contribution limitation on deductions for an individual with self-only coverage under a high deductible health plan is $3,450. For calendar year 2018, the annual limitation on deductions for an individual with family coverage under a high deductible health plan is $6,900. HSAs typically require high deductibles, but they allow people to set aside money from their paychecks on a pre-tax basis for medical expenses.

For calendar year 2018, according to the IRS, a “high deductible health plan” is defined 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, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,650 for self-only coverage or $13,300 for family coverage.

For 2017, the lower limit on the annual deductible under a high-deductible plan was $1,300 for self-only coverage and $2,600 for family coverage, the same as for 2016. The upper limit for out-of-pocket expenses was $6,550 for self-only coverage and $13,100 for family coverage

If you […]

By Linkenheimer LLP|May 24th, 2017|hsa|0 Comments

Health Savings Accounts (HSAs)

HSAs allow eligible individuals to make deductible contributions that can be withdrawn tax-free later to reimburse the individual for eligible medical expenses. For 2016, the limitation on HSA deductions is $3,350 for an individual with self-only coverage under a High Deductible Health Plan (HDHP) or $6,750 for an individual with family coverage. An HDHP is defined under IRC Sec. 223(c) as a health plan with an annual deductible not less than $1,300 for self-only coverage or $2,600 for family coverage, with annual out-of-pocket expenses (deductibles, copayments, and other amounts, but not premiums) not exceeding $6,550 for self-only coverage or $13,100 for family coverage. If you have any questions, please contact your Linkenheimer CPA.

By Linkenheimer LLP|May 15th, 2015|hsa|0 Comments

Year-end tax planning with checklists and tips

Year-end tax planning could be especially productive this year because timely action could nail down a host of tax breaks that won’t be around next year unless Congress acts to extend them, which, at the present time, looks doubtful. These include, for individuals: the option to deduct state and local sales and use taxes instead of state and local income taxes; the above-the-line deduction for qualified higher education expenses; and tax-free distributions by those age 70-1/2 or older from IRAs for charitable purposes. For businesses, tax breaks that are available through the end of this year but won’t be around next year unless Congress acts include: 50% bonus first-year depreciation for most new machinery, equipment and software; an extraordinarily high $500,000 expensing limitation; the research tax credit; and the 15-year write-off for qualified leasehold improvements, qualified restaurant buildings and improvements and qualified retail improvements.

High-income-earners have other factors to keep in mind when mapping out year-end plans. For the first time, they have to take into account the 3.8% tax surtax on unearned income and the additional 0.9% Medicare (hospital insurance, or HI) tax that applies to individuals receiving wages with respect to employment in excess of $200,000 ($250,000 for […]

By Linkenheimer LLP|November 26th, 2013|3.8, 401k, agi, amt, best place to work, CPA, hsa, ira, medicare, mike musson, roth ira, Santa Rosa, tax, tax planning, year-end|0 Comments

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