Excess contributions are subject to taxes, plus an additional six percent excise tax. The account holder is responsible for ensuring that the contribution limit is not exceeded. In a married couple, if both spouses are age 55 or over, each spouse can contribute a $1,000 catch-up contribution to his or her own HSA. Individuals aged 55 or over are entitled to an additional catch-up contribution of $1,000. Spouses enrolled in an HDHP cannot have a joint HSA, but each spouse can have a separate HSA and contributions can be allocated between the HSAs. Special rules apply in determining the contribution limits for a married couple. The amount that can be contributed on a tax-free basis to an HSA for a year is limited based on the account owner’s months of HSA eligibility and type of HDHP (self-only or family). To be deductible for a given tax year, contributions must be made during the year or by April 15 of the following year. Individuals can make contributions from their personal funds and deduct the contributions on their individual income tax returns.Typically, employers will make their contributions ratably throughout the year. These contributions are not treated as taxable income to the employees and thus are exempt from income and payroll taxes. Employers can make contributions directly to their employees’ HSAs.Generally, employees can start, modify or stop HSA contributions at any time during a year. These payroll deductions are not subject to federal income tax, Social Security or Medicare (FICA) taxes or most state income taxes. Employees can make pretax HSA contributions via payroll deductions, if allowed by their employer.There are three ways that tax-free contributions can be made to HSAs: To be eligible for an HSA, an individual cannot be enrolled in other non-HDHP coverage, such as a general-purpose health reimbursement account (HRA) or health flexible spending account (FSA) or in Medicare. The HDHP must meet certain limits on deductibles and out-of-pocket expenses based on whether it is self-only coverage (for one person) or family coverage (for more than one person). In order to contribute to an HSA, an individual must be enrolled in a high-deductible health plan (HDHP). The first tax advantage of HSAs is that contributions to the account are tax-free if certain requirements are met. For a discussion of some of the advantages to employers of offering HSAs to employees, check out this related article. This article provides an overview of HSAs and their tax benefits for individuals. These personal accounts also offer opportunities for individuals to accumulate funds for their retirement years. HSAs are the only investment vehicles that provide tax-free contributions, earnings and distributions to pay for medical expenses. Health savings accounts (HSAs) have grown in popularity since they were first introduced in 2004 however, many individuals are still unaware of the triple tax benefits available with these accounts.
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