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.