Health Savings Account - HSA 2016 Rules & Requirements

May 14, 2015

The IRS recently announced the Health Savings Account (HSA) rules and requirements for 2016. This article reviews the HSA contribution limits, HDHP minimum required deductibles, and out-of-pocket maximums for 2016, as set annually by the Internal Revenue Service (IRS).

2016 Annual HSA Contribution Limits2016_Health_Savings_Account_HSA_rules_and_requirements

For calendar year 2016, the annual HSA contribution limits are:

  • Individuals (self-only coverage) - $3,350 (no change from 2015)

  • Family coverage - $6,750 (up $100 from 2015)

2016 HDHP Minimum Required Deductibles

For calendar year 2016, the High Deductible Health Plan (HDHP) required deductibles for an HSA are:

  • $1,300 for self-only coverage (no change from 2015)

  • $2,600 for family coverage (no change from 2015)

2016 HDHP Out-of-Pocket Maximum

The annual out-of-pocket expenses include deductibles, co-payments, and other amounts, but not premiums.

For calendar year 2016, the out-of-pocket maximums are:

  • $6,550 for self-only coverage (up $100 from 2015)

  • $13,100 for family coverage (up $200 from 2015)

If you use an HSA to pay for unqualified medical expenses, the tax penalty is 20% of the HSA distribution.

Related - IRS Publication 969 - Guidelines for HSAs, HRAs, MSAs, and FSAs

Background on Health Savings Accounts

Health Savings Accounts, or HSAs, are a popular type of medical reimbursement plan. HSAs are individual bank accounts owned by employees that allow for tax-free payment or reimbursement of eligible medical expenses. An employer usually offers an HSA-qualified high-deductible health plan and an HSA.

U.S. federal regulations require citizens to have a minimum deductible on their health insurance from all sources in order to make tax-deductible contributions to their Health Savings Accounts (HSA).

Related - Health Savings Accounts (HSAs) - 10 FAQs

HSAs combine the benefits of both traditional and Roth 401(k)s and IRAs for medical expenses. Taxpayers receive a 100% income tax deduction on annual contributions, they may withdraw HSA funds tax-free to reimburse themselves for qualified medical expenses, and they may defer taking such reimbursements indefinitely without penalties.

HSAs are unique—“IRAs on Steroids”—with triple tax advantages:

  1. Tax-deductible contributions,

  2. Tax-free accumulation of interest and dividends tax-free, and

  3. Tax-free distributions for qualified medical expenses.

The 2016 HSA guidelines were released by the IRS in Revenue Procedure 2015-30.

Questions about the Health Savings Account (HSA) guidelines for 2016? Leave a question and we’ll help answer.

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