This month, the Internal Revenue Service (IRS) issued its annual inflation adjustment for health savings accounts (HSAs) for 2021.
According to Revenue Procedure 2020-32, for individuals with self-only coverage under a high deductible plan, the annual limitation on deductions is $3,600. This figure is up $50 from this year’s $3,550.
For an individual with family coverage under a high deductible health plan, the annual limitation on deductions is $7,200, up $100 from this year’s $7,100.
For calendar year 2021, 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 for which 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.
According to the IRS, in response to the coronavirus pandemic, high-deductible health plans can cover the costs of COVID-19 testing and treatment before the deductible is met. The CARES Act also allows the use of an HSA or a flexible spending account to pay for over-the-counter drugs without a prescription. In addition, the CARES Act allows the use of HSAs for telehealth/remote care services until Dec. 31, 2021.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.