Internal Revenue Code (IRC) Section 223 allows individuals who are covered by a compatible health plan, often referred to as a High Deductible Health Plan (HDHP), to set aside funds on a tax-free basis up to the contribution limit to pay for certain out-of-pocket medical expenses. Health Savings Accounts have a triple tax benefit—funds go into the account tax-free, funds grow tax-free, and remain completely tax-free when used for eligible medical expenses.
Here are some other unique aspects of HSAs as defined in IRC Section 223:
Contributions can be made by you, your employer, or a third party (e.g. family member or friend). Contributions can either be made on a tax-free basis through a Section 125 Plan or directly into the account on a tax-deductible basis. The IRS sets the maximum annual contribution limit. Generally, HSA contributions do not have to be prorated; however, certain exceptions and conditions apply. Contributions can be made at any time up until the tax filing deadline, typically April 15.
To view the most up-to-date annual contribution limits established by the IRS for HSAs, please visit our Plan Limits page.
To be eligible to contribute to an HSA, you must meet a few basic requirements.
1. You must be covered by a compatible health plan. The IRS defines the minimum deductible, maximum out-of-pocket, and eligible coverage requirements of an HSA-compatible plan. Visit our Plan Limits page to see what those are for the current plan year. Your employer benefits representative should be able to indicate if a specific plan(s) qualifies.
2. You cannot be covered by any non-qualified health plan as it constitutes ineligible coverage. Examples of ineligible coverage include:
3. You cannot be enrolled in Medicare.
4. You cannot be claimed as a dependent on another person’s tax return.
You will also receive a number of ongoing communications. These include:
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Our comprehensive FAQ Section will help you better understand the benefits of an HSA.
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Benefit Resource and BRI are tradenames of Benefit Resource, LLC. Benefit Resource, LLC is an affiliate of Inspira Financial Health, Inc. and Inspira Financial Trust, LLC. Benefit Resource, LLC does not provide legal, tax or financial advice. Please contact a professional for advice on eligibility, tax treatment and other restrictions. Inspira and Inspira Financial are trademarks of Inspira Financial Trust, LLC.
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HSA Custodial Services are provided by a separate financial institution. See your HSA Account Agreement for specific account terms.
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