The Internal Revenue Service (IRS) has announced the annual inflation adjusted limits for health savings accounts (HSAs) and high deductible health plans (HDHPs) for calendar year 2018.
An HSA is a tax-exempt savings account employees can use to pay for qualified health expenses. Deposits into an HSA are tax deductible; contributions grow within the account tax free; and distributions are tax free as long as the money is used for out-of-pocket health care expenses, including deductibles.
If the money is withdrawn before the account owner turns 65, and gets spent on something other than eligible health care expenses, the account owner will have to pay a 20 percent penalty and applicable taxes.
The following chart shows the HSA/HDHP limits for 2018 as compared to 2017. It also includes the catch-up contribution limit that applies to HSA-eligible individuals who are age 55 or older, which is not adjusted for inflation and stays the same year to year. The HSA contribution limits will increase effective January 1, 2018, while the deductible limits will increase for plan years beginning on or after January 1, 2018.