IRS Releases Inflation Adjustments to Health Savings Accounts for 2024: What It Means for Your Business

At HR Ledger, we always keep up with the latest news from the IRS to ensure our clients have the most up-to-date information. In the recently released Rev. Proc. 2023-23, the IRS has made annual inflation adjustments to health savings accounts.

For calendar year 2024, a “high deductible health plan” is defined as a health plan with an annual deductible of less than $1,600 for self-only coverage or $3,200 for family coverage. Additionally, the annual out-of-pocket expenses (deductibles, copayments, and other amounts, but not premiums) cannot exceed $8,050 for self-only coverage or $16,100 for family coverage.

For the calendar year 2024, the annual limitation on deductions for an individual with self-only coverage under a high-deductible health plan is $4,150. For those with family coverage, the yearly deductions limit is $8,300. It’s worth noting that the HSA catch-up contribution limit for those aged 55 and older remains unchanged at $1,000.

These changes are due to high inflation rates, and the increased limits should bring additional attention to HSAs. Many industry experts tout health savings accounts as a smart way for employees to save for medical expenses, even in retirement. They cite their triple tax benefits:

1. Contributions are made pre-tax,
2. the money in the accounts grows tax-free,
3. and withdrawals for qualified medical expenses are tax-free.

At HR Ledger, we believe that it’s essential to stay informed about these changes so that you can make informed decisions for your company and your employees. As of the end of 2022, Americans held $104 billion in 35.5 million HSAs. If you’re considering an HSA, we recommend speaking with a financial professional to see whether it’s right for you.