Each year, the Internal Revenue Service (IRS) reviews Health Savings Accounts (HSAs) for contribution limits, the minimum deductible required for a health plan to qualify as a high-deductible health plan (HDHP) and the maximum out-of-pocket expenses. Based on this review, the IRS determines what, if any, adjustments for inflation will be made in the upcoming tax (calendar) year.
On May 4, 2017, the IRS announced the 2018 inflation-adjusted amounts for HSAs via Revenue Procedure 2017-37. The HSA contribution, minimum-required deductibles for HDHP and out-of-pocket maximum statutory amounts for 2018 will be:
HSA contribution limits:
• Individuals (self-only coverage) – increased from $3,400 to $3,450*
• Family coverage – increased from $6,750 to $6,900*
HDHP minimum-required deductibles:
• Individuals (self-only coverage) – increased from $1,300 to $1,350
• Family coverage – increased from $2,600 to $2,700
• Individuals (self-only coverage) – increased from $6,550 to $6,650
• Family coverage – increased from $13,100 to $13,300
Out-of-pocket expenses that are eligible under the HSA include deductibles, copayments and other amounts but, while there are specific exceptions, in general, insurance premiums are not eligible for reimbursement under the HSA. Individuals may be allowed to be reimbursed for some over-the-counter medicines and drugs, provided they are prescribed by a qualified healthcare practitioner in accordance with state law.
Pre-tax salary withholdings contributed to a qualified HSA may accumulate and carry forward to subsequent tax/benefit years and are also portable. Any HSA distribution used for an item or service that does not qualify as an eligible medical expense is included in the accountholder’s gross income and is generally subject to additional taxes and penalties.