The IRS has released 2023 contribution limits for health savings accounts (HSAs), and it’s a significant jump of $200 compared to 2022 limits.
In Revenue Procedure 2022-24, the IRS announced that for calendar year 2023, the annual inflation-adjusted limit on HSA contributions for self-only coverage will be $3,850, up from $3,650 in 2022. The HSA contribution limit for family coverage will be $7,750, up $450 from $7,300 in 2022. The adjustments represent a 5.5% percent increase over 2022 contribution limits, which is almost a five-fold increase compared to the 1.4% increase between 2021 and 2022, which amounted to $50 for individuals and $100 for family coverage.
People 55 or older at the end of 2023 can put in an extra $1,000 in “catch up” contributions, which is the same amount allowed in 2022.
HSA participants also must be covered under a high deductible health plan to be eligible for an HSA. For 2023, the health plan must have a deductible of at least $1,500 for self-only coverage or $3,000 for family coverage. Those minimums were $1,400 and $2,800 for 2022.
An HSA allows individuals to set aside pre-tax money to pay for out-of-pocket medical expenses such as copayments, deductibles, and other qualified expenses. These funds remain in the account and are not “use it or lose it” like other types of flexible savings accounts.
HSAs have long been attractive (if underutilized) for offering one of the best tax breaks in the entire tax code. They are uniquely triple-tax-advantaged, as contributions to the HSA reduce your taxable income; the earnings grow tax-free; and qualified withdrawals (used to pay qualified health care expenses) are tax-free.
According to the 2021 Year-End Devenir HSA Research Report, released in late March, health savings accounts grew to $98.0 billion in assets held in over 32 million accounts, a year-over-year increase of 19% for assets and 8% for HSAs as of the end of 2021. Devenir projects that the HSA market will reach 38 million accounts by the end of 2024, holding $150 billion in assets.
Account holders contributed over $42 billion to their accounts in 2021 (up 2% from the year prior) and withdrew almost $31 billion from their accounts in 2021 (up 2% from year prior).
With a growing base of investors and continued strong market gains, the Devenir Report found HSA investment assets rose to an estimated $34.4 billion at the end of the year, up 45% year-over-year. On average, investment account holders have a $19,224 total balance (deposits and investments combined).
SEE ALSO:
• IRS Releases 2022 HSA Contribution Limits
• Bill Seeks to Expand HSAs to Seniors Covered by Medicare
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
