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Monday, March 11, 2013

How will Health Savings Accounts change in 2013?

Those of you who are looking to save money on health care may choose to have a high deductible plan together with a Health Savings Account, as it generally turns out to be cheaper. Here's a guest post on HSA's that those who have them (or if you're considering switching over to them) will hopefully find useful.

Tax season might not be your favorite time of year but recent changes may pique your interest for next April. The IRS has made changes to their regulations and requirements for Health Savings Accounts (HSAs). Funds contributed to HSAs are not subject to federal income tax and can be a great way to save money. However, the 2013 changes may make this more difficult.

What you need to know:


Contribution Limits Have Increased
You can contribute more than ever to your HSA. You can add an additional $150 to your account this year, for a total of $3,250. The family limit is $6,450 for 2013, an increase of $200 from previous years.

Minimum Required Deductibles Have Gone Up
To open an HSA, your account has to be connected to a qualified high-deductible health plan. This can be costly in the short term. For 2013, the minimum deductible for an individual went up $50 to $1,250. For families it rose to $2,500 (an increase of $100).

Out-Of-Pocket Maximums Also Increased
Out of pocket expense maximums, which exclude insurance premiums, have risen $200 for individuals to $6,250. The family maximum rose by $400 to $12,100. Pay attention to what falls under your qualified medical expenses. If you use funds from your HSA for an unqualified medical expense, you will trigger a tax penalty equal to 20 percent of the HSA credit.

Covering Adult Children
The Affordable Care Act did not change how HSA funds and children are handled by the IRS. Although the ACA allows children under the age of 26 to remain on their parent’s health insurance plan, the IRS did not change the definition of a “dependent”. If your child is no longer claimed on your taxes as a dependent, you cannot use HSA funds to pay medical bills for them.

Here is how the IRS defines a dependent:
• The person lives in the same place of residence as the covered employee for more than one-half of the taxable year.
• The person did not provide over one-half of their own support during the taxable year.
• The person must be younger than 19 years old (or not yet 24* if a student) at the end of the tax year, or the person must be permanently and totally disabled.

*Notice the age is two years less than the new rules under the Affordable Care Act.

See my disclaimer.

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