The IRS announced the HSA contribution limits for 2021 in May. The annual limit on HSA contributions for self-only and family coverage will be $3,600/$7,200, respectively, in 2021. It is about a 1.5 percent increase from 2020’s limits of just over 3%. It represents an increase of $50-$100 per year compared to what was allowed last year ($2,750/6,750).
The IRS just released their 2020-32 Revenue Procedure with changes in HSA contribution limits and minimum deductible/maximum out-of-pocket expenses for high-risk plans (HDHP). It is an important update in comparison to last year as these requirements have changed substantially. However, don’t stress – our agents are always on call 24 hours per day. So talk to one today if anything comes up!
- Flexible Spending Accounts (FSA) Contribution Limits
- 6 Marketplace Health Insurance Alternatives to Obamacare
- Consumer Directed Health Plans (CDHPs)
- Using HSAs with Social Security and Medicare
Are HSA Contribution Limits 2021 on Pro-rata Basis?
Contribution limits are set based on the calendar year. Meaning allowable contributions will be on a pro-rata basis according to the number of months an individual is eligible to contribute. For example, individuals with self-only coverage who were HSA eligible for seven months during the 2021 tax year could only contribute up to $2,100. Catch-up contributions would also be on a pro-rata basis if they had turned 55 and over.
So they couldn’t add more than a few hundred dollars extra at most. Contributing funds any time before their federal return due date is also permissible. Just keep in mind that funds are scarce, and you need to make sure that you aren’t over-contributing.
How do HSA Contribution Limits 2021 and Guidelines compare with 2020 limits?
It’s not every day that you get a raise, and it feels pretty good. But this one is different from all the others. Because now your HSA contribution limit has gone up to $50 for individuals with self-only coverage or 100 dollars more.
Suppose you’re an individual who needs to cover their family in addition to themselves! The increase from 2019 (2020) reflects what took place last year, so don’t worry – there were no changes made when going into 2021.
How do 2021 Deductibles and Out-of-Pocket Amounts Compare?
Luckily, deductibles have remained the same for 2021. But your out-of-pocket expenses will be a little more expensive with an increase of $100 per person and $200 extra if you’re in family coverage!
HSAs are just one Possibility for a Comprehensive Health Benefit
In today’s modern world, HSAs are a great way to save for your future health needs. You can use the money in these accounts to pay bills when you’re out of work due to an illness or injury and also have plenty left over if you retire early!. In addition, these savings plans typically require little paperwork because employers do not offer them; instead, individuals purchase them.
With competitive rates on premiums from insurance providers who offer HSA products, like Nationwide Insurance Company®, this account has become increasingly popular with small businesses and their employees. If that wasn’t enough incentive for employers already (and why wouldn’t it be?), consider what happens next: any contributions made toward their employee’s HSAs can be considered valuable healthcare benefits.
The IRS just announced their new HSA contribution limits for 2020-2021. It is really great news if you’re in the market to purchase an HDHP. As it will provide a little more flexibility and options when choosing your insurance plan. If you have any questions about how this may impact your health coverage, comment below.
- IRS Official Website
- IRS-Forms, Instructions & Publications
- Revenue Procedure 2020-32
- Contact Your Local IRS Office
- About Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
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