The IRS has set higher limits for 2014 for health savings account contributions and out-of-pocket expenses under high-deductible health plans.
Next year's HSA limits are $3,300 for an individual and $6,550 for a family, up from $3,250 and $6,450.
HDHPs minimum deductibles remained at $1,250 for an individual and $2,500 for a family, while HDHP out-of-pocket limits rose to $6,350 for an individual and $12,700 for a family, up from $6,250 and $12,500.
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These higher limits come as part of a cost-of-living adjustment and rounding rules covered in IRS Code Section 223. This year's increase to higher limits is slightly lower than the previous, which is due to a more modest calculation of the inflation rate by the government.
Unless they are completely or permanently disabled, those under age 65 using HSA funds for nonqualified medical expenses could be charged with a penalty of 20 percent of the total for those expenses. Funds spent on nonqualified purposes also are subject to income tax.
Under the Patient Protection and Affordable Care Act, parents can add their adult children up to age 26 to their health plans; however, the IRS has not modified how it defines a dependent for health savings accounts.
A plan participant cannot spend HSA funds on an adult child if he or she is not claimed as a dependent on the plan participant's tax returns. The IRS states that a qualifying child has the same primary place of living as the covered employee for more than half of the taxable year, has not provided more than half of his or her own support during the taxable year, is not yet 19 or 24 if a student at the tax year's end, or is permanently and totally disabled.
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