Americans eligible for Health Savings Accounts will be able to deposit more money into the accounts beginning next year following a recent inflation adjustment by the IRS.
The agency on Friday announced that in 2023 you can save up to $3,850 with an individual health insurance plan, CNBC reported. That’s up from $3,650 this year. Those with a family plan will be able to contribute $7,750 in 2023 vs. $7,300 in 2022.
The adjustments represent a year-over-year increase of about 5.5% — much higher than the 1.4% increase between 2021 and 2022, according to the Society for Human Resource Management (SHRM).
“[The new limits] are a significant jump, much higher than previous increases on an annual basis,” Kevin Robertson, chief revenue officer at HSA Bank, said in a press release on the SHRM site.
Even so, the 5.5% hike set for 2023 is still well below the current rate of inflation, which is running at a 41-year high of 8.5%.
To qualify for an HSA plan in 2023, you must have eligible high-deductible health insurance with an annual deductible of at least $1,500 for self-only coverage, or $3,000 for family plans. Those deductibles are up from $1,400 and $2,800, respectively, in 2022, the SHRM noted.
For employers, the 2023 limits can be used during open enrollment to encourage workers to start contributing to their accounts or to raise their current contribution rates. The higher limits might also serve as an incentive for employers who don’t already contribute to employees’ HSAs to begin doing so, “even if it’s a nominal amount, a couple of hundred dollars or whatever,” Robertson said
Employer contributions are useful in that they heighten employees’ engagement with their accounts and enhance the perceived value of their health care benefits, Robertson said. This could prove especially helpful in attracting and retaining employees in the current tight labor market.
One benefit of HSAs for account holders is that they offer certain tax advantages, including a write-off for contributions that lowers your adjusted gross income, regardless of whether you itemize deductions. You also can invest your balance and grow the money tax-free, then use the money tax and penalty-free for eligible medical expenses.
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