Contribution limits for the ever-popular health savings account (HSA) are set for 2024. And inflation adjustments break through the historic trends of a 1-2% yearly increase. Next year, the amount you can save to pay for health costs with pre-tax dollars jumps by more than 7%!

Health Savings Account

An HSA is a tax-advantaged savings account whose funds can pay qualified health care costs for you, your spouse, and your dependents. The account is a great way to pay for qualified healthcare costs with pre-tax dollars. You can contribute to an HSA via payroll deduction or directly to the account as a deduction adjustment on your tax return. Any investment gains on your funds are also tax-free if they are used to pay for qualified medical, dental, or vision expenses. In addition, unused funds may carry over from one year to the next. To qualify for this tax benefit, though, you must enroll in a high-deductible health plan (HDHP). If you have an HDHP, then you can add an HSA to pay for medical expenses with pre-tax income.

HSA limits

An HDHP plan has minimum deductible requirements that are typically higher than traditional health insurance plans. To qualify for an HSA, your health coverage must have out-of-pocket payment limits in line with the abovementioned maximums. The key is to maximize funds to pay for your medical, dental, and vision care expenses with pre-tax money. For tips on maximizing your HSA, check out our previous blog post, “Understanding tax terms: Health Savings Accounts (HSA).”

Because you know you will always have medical expenses, prioritize your HSA contributions to take advantage of its additional tax benefits. By building your account now, you could have a nest egg for unforeseen future expenses. Contact RRBB Advisors if you have any questions.