As usual, HSA contribution limits have gone up again in Colorado and across the country.
This blog will explore not only the new 2023 HSA contribution limits, but also review the advantages of opening an HSA and answer some frequently asked questions.
- For 2022, the maximum HSA contribution limit in Colorado is $3,750 for an individual and $7,300 for family plans.
- Health Savings Accounts, or HSAs, are a triple-tax-advantaged way to save money for future medical expenses. These funds can add up to hundreds of thousands of dollars over time, becoming a valuable part of your retirement portfolio
- HSAs require that you be enrolled in an HSA-qualified plan. This can be a high deductible health insurance plan (HDHP), or a special form of Healthshare combined with qualifying Minimum Essential Coverage (MEC).
Why You Should Consider Opening a Health Savings Account
Health Savings Accounts take pre-tax payroll money and allow it to grow on a tax-deferred basis. When the funds are withdrawn to pay for qualified medical expenses, they remain 100% tax-free.
It’s easy to underestimate the value of a well-funded HSA. Many people, especially those who consider themselves relatively healthy, might not see the need for an HSA.
The shocking truth is that people retiring in 2023 are on track to spend as much as $300,000 on medical expenses in retirement alone. A well-funded HSA can help protect your other retirement savings from medical bills.
What’s more, HSA funds can be used for all sorts of everyday purchases, making them tax-free. Over-the-counter medications, antacids, eyeglasses, masks, lab fees, x-rays, insulin, allergy medication … all of it and much more can be made tax-free.
Advantages of an HSA
- Triple-tax advantaged: Funds remain tax-free as long as they’re used for medical expenses.
- Easy to operate: HSA contributions can be made automatically, from pre-tax payroll money.
- Big growth potential: Unused funds rollover from year to year, earning valuable interest.
What is the 2022 HSA Contribution Limit?
HSA Contribution Limits
- $3,650 for individual plans
- $7,300 for families
The annual HSA contribution limit is set by the IRS and is the same in Colorado as it is nationwide.
More 2022 Guidelines for HSA
2022 HSA Minimum Deductible Amounts
- $1,400 for individual plans
- $2,800 for family plans
2022 Maximum Out-of-Pocket Limits
- $7,050 for individual plans
- $14,100 for family plans
2022 HSA Contribution Limits FAQ [Frequently Asked Questions]
Q: What is the 2022 HSA Contribution Limit?
A: The 2022 HSA contribution limit is $3,650 for individuals and $7,300 for families. This is up from 2021, when the contribution limits were $3,600 for individuals and $7,200 for families.
The annual “catch-up” contribution limit for individuals older than 55 is still $1,000, the same as 2021.
Q: Who can contribute to an HSA?
A: Anyone can contribute to an HSA account, including the account holder, and employer, family, and even friends. Most commonly, HSA contributions are made with pre-tax payroll money, with a portion of the contribution coming from an employer.
Q: What happens if I contribute too much to an HSA?
A: Excess HSA contributions, as well as any interest earned on the excess, is no-longer tax-free. For each year that the excess funds are in your account, those funds will incur a tax penalty of 6%.
Q: How do I fix an excess HSA contribution?
A: The easiest way to fix an excess HSA contribution is to remove the excess (and any interest earned) from the account before the annual tax deadline. It is also possible to “roll over” the excess contribution towards next year’s limit. This is a slightly more complicated process that involves IRS form 5329.
Q: What is the 2023 HSA contribution deadline?
A: The 2022 HSA contribution deadline was April 18th. It is usually on April 15th every year.
Get Serious About Your Investment Portfolio – Find an HSA-Qualified Health Plan
The only way to open an HSA is to enroll in a high deductible health plan (HDHP), or a specialized HSA-capable healthshare plan. Not all plans are HSA-qualified, so it’s essential to double-check before switching plans.
When you’re ready to switch plans, or if you have any other questions about your health plan, make an appointment with a Personal Benefits Manager.
For ongoing help in managing and maximizing your HSA returns, subscribe to our monthly newsletter, Maximize Your HSA. You can also click here to read the library of back issues at no cost.