Contributions to a Health Savings Account have its limits. The maximum contribution for an HSA for the 2021 calendar year has been announced by the Internal Revenue Service in May 2020.
The maximum contribution an individual can make to a Health Savings Account is $3,600 for self-only coverage and $7,200 for family coverage. When compared to the last previous year’s contribution limits, this is a $50 increase for self-only and $100 for family coverage.
|Year||Self-Only Maximum Contribution||Family Maximum Contribution|
This increase in the HSA contribution limits have a direct impact on the out-of-pocket amounts but doesn’t have it on the deductibles. Same as 2020, the HDHP minimum deductible is $1,400 for self-only and $2,800 for family.
HSA Contributions Deduction
The contributions to a Health Savings Account is deductible. Regardless of how much you contribute, you can claim a full deduction. If you max out your HSA contributions, it can add up to a significant deduction amount.
The best part about this deduction is that you aren’t even required to itemize deductions. It can be claimed with the standard deduction. This can definitely help you to reduce taxable income while enjoying the benefits of HSA.
Where can I find total HSA contributions?
Employers must report both employer and employee contributions made when processing payroll. The HSA contributions are reported on Form W2, Wage and Tax Statement, on Box 12. The code for the HSA contributions is W.
Is HSA contributions taxable?
The contributions to Health Savings Accounts are made with pre-tax dollars, therefore, they are not taxable. These are also exempt from FICA taxes (Social Security and Medicare). So, you won’t pay tax on your contributions but may be subject to tax if the contribution is made in excess of the maximum limit.
Is the HSA deduction worth maxing out?
As straightforward as this can be—yes! The tax benefits of contributing to an HSA is too good to avoid. While you’re getting a tax-free contribution to your account, you also get a full deduction that reduces your taxable income.