The health savings account or HSA contribution limits 2022 calculator is one of the easiest way to find out the total contribution that you can make during the tax year 2022. The calculator requires just yes or no answer and your input for HSA employers contribution to find out maximum amount that you can contribute during 2022.
What is HSA?
A health savings account (HSA) is a health focussed investment plan that has added advantage of tax savings as well .The savings in HSA can be used to pay for qualified medical expenses and any unused fund (balance in your account ) are retained for you . Basically , this saving account accumulates fund for future health expense and at the same time grows for your retirement years .Another great thing about HSA remains valid for life.Thus, your investment in HSA will grow years after years and whenever you get medical expense, just use those accumulated balance .
HSA contribution limits 2022 Calculator
HSA contribution limits 2022 Calculator – logic used
The basic formula and principle used for building the HSA contribution limits 2022 calculator are:
- The HSA contribution limits depends in the type of plants-individual or family .
- Whether employer puts in money for employee or not, limit is for employees only.
- If employee buys HDHP became active in a tax year (say 2022) not for whole year and do not keep his HDHP through December 31, 2023, his contribution limit will be on prorate basis.
- f employee buys HDHP became active in a tax year (say 2022) not for whole year and do keep his HDHP through December 31, 2023, his contribution limit will be for the whole year.
What are HSA contribution limits 2022 ?
The 2022 HSA contribution limits are $3,650 for Individual plan and $ 7,300 for family. You can also claim extra savings of $1,000 if the age of the participant is 55 years or more . This is often called as HSA catch-up contributions.
Who is eligible for an HSA?
Eligibility rule to HSA requires that you have coverage under a high deductible health plan (HDHP) and have no other health plans including Medicare . For most people, if you are eligible on 1st December of the tax year and remains so till 31st December , you will be deemed to be eligible for the whole year .
How to pay contribution to HSA?
If you are an eligible individual, anyone can contribute to your HSA. However, you cannot be enrolled in Medicare or be another person’s dependent. You can deposit amounts in HSA by any of following three ways :
- Deposit HSA through employers as pre-tax payroll contributions,
- Deposit by check or bank transfer of the amount to HSA
What are HSA tax benefits?
There are three exclusive tax benefits are attached to health savings account (HSA) .
- When you contribute , it is tax deductible.What it means is that the money on which you would have paid tax , becomes tax free income if you transfer that amount to an HSA. Say , you are on average tax rate of 25% . You saved $2,000 to an HSA . It means you can use that $2,000 for your future expense on health and on that $2,000 you did not pay any tax in the year of earning !
- When you get income in form of interest or out of investment in HSA, your wealth for health purpose grows. The government does not tax on any earning on the HSA as long as it is there or used for medical expense.
- Any withdrawal from HSA account for the purpose of eligible medical expense , is also tax free. The value of this can be understood when you compare with a 401K plan. Let us say you do not have a HSA, and uses 401K to fund your medical expense. At that time, this will feel like double whammy-spending money on medical expense by withdrawal from 401K and also paying taxes on withdrawal. If you take an HSA, no tax will be levied on withdrawal for medical expense.
Tax implication when you fail HSA eligibility
If you fail eligibility test during the year, you must include the contribution made for that year in your total income for the said tax year.The contribution that is added on failing the eligibility test will suffer 10% additional tax.
Is there a separate limit for HSA employer contribution?
There is no separate contribution limit for employers on behalf of employee. The overall limit to contribute depends entirely on employees .In fact, the contribution by employers are, just optional as law does not bind them to contribute .
Why HDHP buy is a must for HAS?
As you have already read earlier that the accumulated balance from the HSA should be used for medical expenditure , then there is no tax on withdrawal. The law provides that in order to get tax benefits , you must buy a high-deductible health plan (HDHP ) which is basically a health insurance plan which charges very low premium in comparison to general health insurance plans, but still offers very high deductibles.
What does high deductible mean? For HDHP, it means the portion of an insurance claim that the insured must pay out on his own before the policy coverage is activated. As per the HDHP contract , when your part of insurance is paid than only insurance company takes responsibility of paying the balance of insurance claim.IRS prescribes minimum deductible for an HDHP at o $1,400 for individual and $2,800 for families. For tax year 2022 , the maximum deductible is fixed at $7,050 for single and $14,100 for family .for 2021 is $7,000 for an individual and $14,00 for a family. These limits increase to $7,050 and $14,100 in 2022.
For knowing more about HSA contribution limits 2022 calculator , read IRS publication.