Previously, employers could set whatever limit they wanted on employee contributions to Flexible Spending Accounts (FSAs) for health care. But starting this year, the maximum limit is $2,500.
If you’re concerned about a lower limit and aren’t contributing to a Health Savings Account (HSA), look into whether you’re eligible — you must be covered by a qualified high-deductible health plan. As with FSA withdrawals, HSA withdrawals for qualified medical expenses are tax-free. But the HSA contribution limits are higher: $3,250 for self-only coverage and $6,450 for family coverage, plus an additional $1,000 for taxpayers age 55 or older.
HSAs also may be more beneficial because they can bear interest or be invested and can grow tax-deferred similar to an IRA. Additionally, you can carry over a balance from year to year. If you have an HSA, however, your FSA is limited to funding certain “permitted” expenses.
An HSA also can provide a way to do some post-Dec. 31 tax planning: You have until the April filing deadline to make your contribution. Please contact us to learn whether you could benefit from an HSA.
If you have any questions, please contact your Meaden & Moore Representative or Pete DeMarco at 216.928.5345 or firstname.lastname@example.org.