The IRS has just announced the 2016 inflation adjustments to the Health Savings Account (HSA) contribution limits and the High Deductible Health Plan (HDHP) plan limits. These changes will become effective on January 1, 2016. Download the IRS official notice.
HSA Contribution Limits
HDHP Minimum Deductible
- Single Coverage: $3,350 (unchanged from 2015)
- Family Coverage: $6,750 (up from $6,650 in 2015)
HDHP Out-of-Pocket Maximum
- Single Coverage: $1,300 (unchanged from 2015)
- Family Coverage: $2,600 (unchanged from 2015)
- Single Coverage: $6,550 (up from $6,450 in 2015)
- Family Coverage: $13,100 (up from $12,900 in 2015)
Medical plans which meet the IRS guidelines, including the minimum deductible and out-of-pocket limits, qualify as HSA compatible plans. The benefit of an HSA compatible plan is that it allows those enrolled in such plans to contribute to an HSA up to the IRS annual limit. HSA contributions qualify as an "above the line" federal tax deduction, meaning the contributions made to the HSA reduce Adjusted Gross Income (AGI). In addition to reducing AGI, the interest earned in an HSA is not subject to federal taxes, and withdrawals from an HSA for qualified health expenses are not subject to federal taxes. Each state taxes HSA contributions differently, so please seek individual tax advice from a professional to determine how your state handles HSA contributions.
The IRS's governing rules and the eligibility criteria for an HSA can be complex. It is very important for benefit administrators and plan participants to be aware of these rules and consult with a benefits and or tax professional when questions arise. Tax penalties will apply for noncompliance.