IRS Announces HSA Limits for 2024: What This Means for You

The Internal Revenue Service (IRS) recently published their annual inflation adjustments for Health Savings Accounts (HSAs) in Rev. Proc. 2023-23. As HSAs continue to gain popularity due to their numerous tax advantages, it is essential for the general public to stay informed about these updates. Below, we break down the 2024 HSA limits and discuss the factors contributing to these changes.

Key HSA Limit Changes for 2024

  1. High Deductible Health Plans (HDHPs): For the calendar year 2024, an HDHP is considered a health plan with an annual deductible of at least $1,600 for self-only coverage or $3,200 for family coverage. The annual out-of-pocket expenses (including deductibles, copayments, and other amounts, but excluding premiums) must not exceed $8,050 for self-only coverage or $16,100 for family coverage.
  2. Annual Deduction Limit for Self-Only Coverage: The maximum annual deduction for an individual with self-only coverage under an HDHP will be $4,150 in 2024.
  3. Annual Deduction Limit for Family Coverage: In 2024, the maximum annual deduction for an individual with family coverage under an HDHP will be set at $8,300.

It is important to note that the HSA catch-up contribution limit for individuals aged 55 and older remains unchanged at $1,000 by statue.

Factors Behind the HSA Limit Changes

The Society for Human Resource Management (SHRM) highlights several reasons behind the significant 7% increase in annual contribution limits, one of the largest jumps in recent years. The primary factor is the high inflation rate, which directly impacts these limits.

This substantial adjustment in HSA limits brings additional attention to HSAs as a valuable financial tool. Many industry experts endorse health savings accounts as a smart way for employees to save for medical expenses, even during retirement. HSAs provide triple tax benefits that make them an attractive option for those seeking to optimize their financial planning:

  1. Contributions are made using pre-tax dollars.
  2. The money in the accounts grows tax-free.
  3. Withdrawals for qualified medical expenses are tax-free.

By staying informed about HSA limits and understanding their inherent value, individuals and families can make more informed decisions when it comes to planning for healthcare expenses. This knowledge can lead to improved financial health and overall well-being in the long run.