Financial Planning

Health Savings Accounts (HSAs) – 2022 Limits

Health Savings Accounts (HSAs) – 2022 Limits

Financial Planning, Tax Planning

A Health Savings Account (HSA) is a type of savings and investment account for medical expenses. The funds in an HSA can be used at any time but only those currently enrolled in a high deductible health plan are eligible to contribute to an HSA.

Tax Advantages of Using an HSA

Health savings accounts have three main tax advantages:

  1. Contributions to an HSA are tax-deductible. Furthermore, contributions made through payroll are not subject to FICA and FUTA taxes.
  2. Interest and investment earnings grow tax-free.
  3. Distributions from the HSA are tax-free when used for qualified medical expenses.

What Medical Expenses are Covered by an HSA?

HSAs can be used to cover qualified medical expenses for you, your spouse, or any tax dependent – even if they are on a different health plan. Qualified medical expenses include most medical and dental procedures, vision care, prescription drugs, lab fees, long-term care insurance premiums, and Medicare premiums.

However, you cannot use HSA funds to pay for supplemental Medigap insurance premiums or over-the-counter drugs.

Note that if distributions are for non-qualified medical expenses, they are subject to income tax, and if the distribution is taken prior to age 65, a 20% excise tax may also apply.

HSA Limits for 2022

If the high-deductible plan is for an individual, the HSA contribution limit for 2022 is $3,650. If it is for a family, the limit is $7,300. Individuals can contribute to HSAs as long as they are enrolled in high-deductible health plans.

However, once enrolled in Medicare, they can no longer contribute to an HSA plan.

Health Savings Accounts Best Practices

  1. Fully fund your HSA: Cash flow permitting, if you are enrolled in a high-deductible health plan, consider contributing the annual maximum amount to your health savings account.
  2. Invest the HSA: Invest the funds in your health savings account to take advantage of compounding growth over time.
  3. Cover medical expenses from cash flow: Cash flow permitting, cover your medical expenses from cash flow to allow your health savings account to remain invested until retirement.
  4. Save your receipts: Save receipts for all medical expenses. You can use these to reimburse yourself from the HSA at a later date.
  5. Name a beneficiary: It is important to designate a beneficiary on your HSA. When you pass away, what happens to your HSA depends on your beneficiary designation. If your spouse is the beneficiary, they will inherit the HSA and it will be treated as if it is their own. However, is someone other than your spouse is the beneficiary, the account stops.

Contributing to an HSA may be a great tool to reduce taxes owed today and to save for future health care costs depending on your situation. If you are interested in a high-deductible health care plan, contact your employer’s HR department and ask if a high-deductible plan is an option. Please also feel free to Contact Us to discuss how an HSA may work in your specific situation.

Editor’s Note: This article was originally published in 2018. It has been updated to reflect 2022s limits.

*Tax references are at the federal level. Individuals should consult with a tax advisor regarding state taxes. 

Important Disclosure Information: Schultz Financial Group, Inc. (“SFG”) which is a registered investment adviser, drafted this blog post for its website and for the use of its clients or potential clients. Any other distribution of this blog post is strictly prohibited. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that SFG has attained a certain level of skill, training, or ability. While the content presented is believed to be factual and up to date, it is based on information obtained from a variety of sources. SFG believes this information is reliable, however, it has not necessarily been independently verified. SFG does not guarantee the complete accuracy of all data in this blog post, and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of SFG as of the date of publication and are subject to change. This blog post does not constitute personalized advice from SFG or its affiliated investment professionals, or a solicitation to execute specific securities transactions. SFG is not a law firm and does not intend for any content to be construed as legal advice. Readers should not use any of this content as the sole basis for any investment, financial planning, tax, legal or other decisions. Rather, SFG recommends that readers consult SFG and their other professional advisers (including their lawyers and accountants) and consider independent due diligence before implementing any of the options directly or indirectly referenced in this blog post. Past performance does not guarantee future results. All investment strategies have the potential for profit or loss, and different investments and types of investments involve varying degrees of risk. There can be no assurance that the future performance of any specific investment or investment strategy, including those undertaken or recommended by SFG, will be profitable or equal any historical performance level. Any index performance data directly or indirectly referenced in this blog post is based on data from the respective copyright holders, trademark holders, or publication/distribution right owners of each index. The indexes do not reflect the deduction of transaction fees, custodial charges, or management fees, which would decrease historical performance results. Indexes are unmanaged, and investors cannot invest directly in an index. Additional information about SFG, including its Form ADV Part 2A describing its services, fees, and applicable conflicts of interest and Form CRS is available upon request and at https://adviserinfo.sec.gov/firm/summary/108724.

Where you want to go in life is up to you. How to help you get there is up to us.

Contact us today to start your journey…

Contact

Schultz Financial Group Inc.
10765 Double R Blvd. Suite 200
Reno, NV 89521
Phone: (775) 850-5620
Fax: (775) 850-5639
Email: [email protected]

Where you want to go in life is up to you. How to help you get there is up to us.

Contact us today to start your journey…

Contact

Schultz Financial Group Inc.
10765 Double R Blvd. Suite 200
Reno, NV 89521
Phone: (775) 850-5620
Fax: (775) 850-5639
Email: [email protected]

 

Design by Social Firm | Design by Refresh Design Services | Copyright © 2019 Schultz Financial Group Inc.

 

Design by Social Firm
Design by Refresh Design Services
Copyright © 2019 Schultz Financial Group Inc.