Hi everyone, this article will be super short and sweet, BUT anyone who knows me knows I am a fan of Health Savings Accounts for several reasons.
No, they did not end up being anywhere close to the silver bullet/healthcare solution that the government intended 20 years ago when they first rolled out, but they do offer a lot of tax advantages for those that can tolerate the health plan that is tied to it, so I do like to talk about these and make sure everyone understands what they are and how they work.
This type of plan and spending account arrangement may not make sense for you, but I want to ensure everyone understands their advantages, especially those who end up paying a boatload of taxes every year. An HSA in that situation can help put some of that aside and not necessarily send it right over to Uncle Sam.
One of the biggest ones is that you can contribute dollars to your HSA with pre-tax dollars. This is a good deal for most who participate and lets you start saving up for future expenses, whether that is going to be later this year or ten years from now. You’ll never be taxed on these dollars if you use them on health, dental, or vision expenses allowed by the IRS (see here).
Like most years, the IRS has updated the contributions for 2023, but for 2023 the amounts have gone up much more than the standard $100 – $200. See the rudimentary chart I put together below showing last year’s contributions (2022) vs. what is new for 2023. Remember, you can update your HSA contributions at any time, so if you like to max out your HSA for tax purposes, you may want to do that now.
As you can see, there’s a $200 increase in the allowed contribution for 2023 at the individual level and $550 for anyone also enrolled with one or more dependents on their HSA at the family level. This is mainly due to the inflation we’re seeing (this is what I’m told), so the feds have decided to let us put away a little more money for future years.
Unfortunately, the IRS decided not to update the 55+ catch-up contribution, and they haven’t in a while. Remember here if you and your spouse are both 55 or older, you should be enrolled in your own HSA to make that $1K 55+ contribution.
Bottom line, if you’re an HSA fan and want to max out your plan, you can do that, so talk to your HR representative or your HSA provider and make it happen! Your future self will be glad you did.