The IRS announced an inflation-adjusted increase to Health Savings Accounts (HSAs) for calendar year 2021. HSAs are savings accounts that employees can use with a high-deductible health plan (HDHP) to cover higher deductibles and copays.
These changes are for calendar year 2021:
- The annual limitation on deductions for an individual with self-only coverage under a high deductible health plan is $3,600.
- The annual limitation on deductions for an individual with family coverage under a high deductible health plan is $7,200.
- A “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $7,000 for self-only coverage or $14,000 for family coverage
HSAs offer multiple advantages and can be used for a wide range of medical expenses, including, but not limited to, deductibles under the HDHPs. Qualified medical expenses also include dental services, vision care, prescription drugs, co-pays, psychiatric treatments and other qualified medical expenses not covered by a health insurance plan.