The Internal Revenue Service (IRS) has released the 2012 inflation adjusted amounts forHealth Savings Accounts(HSAs) as determined under the Internal Revenue Code.
Background on HSAs
An HSA is a health savings account (a tax-exempt trust or custodial account) set up exclusively for paying qualified medical expenses. To be eligible to have contributions made to an HSA, an individual must be covered under a high deductible health plan (HDHP) and meet certain other eligibility requirements.
An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual. Contributions, other than employer contributions, are deductible on the eligible individual’s return whether or not the individual itemizes deductions. Employer contributions are not included in income. Distributions from an HSA that are used to pay qualified medical expenses are not taxed.*
Annual Contribution Limitation
For calendar year 2012, the annual limitation on HSA deductions for an individual with self-only coverage under a high deductible health plan is $3,100. The annual limitation on HSA deductions for an individual with family coverage under a high deductible health plan is $6,250for calendar year 2012.
High Deductible Health Plan
For calendar year 2012, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,200 (no change from calendar year 2011) for self-only coverage or $2,400 (no change from calendar year 2011) for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,050 for self-only coverage or $12,100 for family coverage.
To view Revenue Procedure 2011-32, please click here. You can learn more about HSAs in the HR360 section on Health Savings Accounts.
*Note that, under the new Affordable Care Act requirements, only medicines or drugs that are prescribed (including over-the-counter medicines or drugs obtained with a prescription) or insulin are considered qualified medical expenses for HSA purposes for amounts paid after 2010. Additionally, for HSA distributions after 2010, the additional tax on distributions not used for qualified medical expenses is increased to 20%.
