In Rev. Proc. 2020-32, the IRS provides the 2021 inflation-adjusted amounts for Health Savings Accounts. These changes are for calendar year 2021:
- The annual limitation on deductions for an individual with self-only coverage under a high deductible health plan is $3,600.
- The annual limitation on deductions for an individual with family coverage under a high deductible health plan is $7,200.
- 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 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
HSAs are savings account that employees can use with a high-deductible health plan to help cover higher deductibles and copays. There are multiple advantages to such a system. Money in HSAs can be used for a wide range of medical expenses, including — but not limited to — the deductibles under the HDHPs. Qualified medical expenses also include dental services, vision care, prescription drugs, co-pays, psychiatric treatments and other qualified medical expenses not covered by a health insurance plan.
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