You’ll be able to set aside more money in 2020 for your health savings account (HSA). The IRS has increased the amount you can contribute to an HSA for both individual coverage and family coverage.
In 2020, you can set aside $3,550 for an individual HSA account, up $50 from 2019. The increase for family coverage is $100 in 2020, with a limit of $7,100 for the year. If you’re over 55 years old, the catch-up contribution limit for 2020 is the same as 2019, at $1,000 extra you can contribute to your account.
HSAs are tied to high-deductible health plans (HDHPs). The contribution limits you can contribute to your HSA are tied to inflation, though the growth of medical costs typically outpaces inflation each year.
HSAs offer several tax benefits*:
- Contributions are tax deductible: Like a 401(k), you contribute pre-tax dollars into an HSA, which reduces your taxable income for the year.
- Earnings grow tax-free: You can invest your HSA contributions and the interest accrues tax-free.
- You can withdraw money tax-free: If used for qualified medical expenses, your HSA funds can be used tax-free. You can find a list of this type of expense on the IRS website.
HSAs are different than flexible spending accounts (FSAs). The money you contribute to your HSA doesn’t expire at the end of the year. It can also be rolled over into another HSA account if you change jobs. This makes HSAs particularly valuable as a secondary retirement savings account, as most retirees see an increase in health expenses.
Peoples offers a health savings account option. For help on opening a health savings account, contact a Peoples representative at 888.929.9902.
*Contact your tax advisor for details.