Don't Mess With Taxes

Selecting health care coverage definitely isn't child's play.

Hey there, Health Savings Account (HSA) owners. The Internal Revenue Service has more numbers for you.

Don't freak out. Your 2018 HSA amounts, which were tweaked thanks to changes in the Tax Cuts and Jobs Act and then reinstated to the original limits, are safe.

This time, it's the inflation-adjusted limits on your high deductible health plan, or HDHP, and its associated HSA for the 2019 tax year.

Popular health plan: First a quick bit of background on this health care coverage that is becoming quite popular as medical insurance costs continue to increase.

As the name indicates, people with a high deductible health plan have to pay higher deductibles than many traditional medical insurance policies before the full coverage kicks in.

However, in exchange a HDHP has much lower monthly premiums.

These plans are used by folks who tend to be healthy and don't expect to need a lot of medical care. They do want, though, to have insurance just in case something terrible and unforeseen, say an auto accident or chronic illness, happens.

To help cover their out-of-pocket costs, be they few for such things as basic annual check-ups or many in the case of a medical mishap, HDHP owners can set up a Health Savings Account, or HSA.

Tax breaks, too: In addition to the help with medical costs, HSAs also offer tax savings.

When you contribute to an HSA through a workplace plan, that amount is taken out of your paycheck before taxes are calculated. If you make HSA contributions directly, the amount you contribute are tax-deductible.

And in either case, HSA earnings are tax-free, as are any withdrawals used to pay eligible medical expenses.

The next questions are what constitutes an HDHP and how much can you put into an HSA?

The amounts that define what is a high deductible health plan and how much a person can put into an associated health savings account tend to change annually (this year's multiple revisions and reversions to 2018 amounts notwithstanding) based on inflation.

High deductible plan limits: The IRS today (May 10, 2018) issued the 2019 inflation amounts related to HDHPs and HSAs.

Below are next year's numbers, with 2018's figures shown for comparison purposes, that define a high deductible health plan. Essentially, the coverage's deductible amount must be at least the amounts shown in the table.

In addition, the plans' annual out-of-pocket expenses — this includes deductibles, co-payments and other amounts, but not premiums — cannot exceed specific annual amounts, also shown in the table, now above.

Savings adjustments, too: As for the accounts to help cover those out-of-pocket high deductibles, the IRS says that for the 2019 tax year, the annual HSA deduction limit for a person with self-only HDHP coverage is $3,500. That's $50 more than the 2018 cap.

The annual limitation on deductions for an individual with family coverage under an HDHP goes to $7,000 next year. Again, that's a bump up from 2018's cap of $6,900.

The $1,000 add-on for 55 or older plan owners remains.

If you find an HDHP and HSA work for you and/or your family, these 2019 amounts can help you maximize this medical coverage.

Remember, though, that when deciding on any medical coverage, regardless of what federal tax law might be in place, you should shop carefully for the policy that fits your and your family's medical needs, as well as your bank account.

You also might find these items of interest:

• Comparing tax-favored HSA, HRA & FSA medical options
• Maximizing the many medical expenses that are still tax deductible
• IRS revises 2018 inflation changes to follow newly enacted Tax Cuts and Jobs Act provisions