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Thursday, December 17, 2009

Health Savings Account Contribution Limits for 2010

By William Perez, Guide to Tax Planning

For 2010, the maximum amount that can be contributed to health savings accounts are:

•$3,050 for self-only coverage,
•$6,150 for family coverage,
•$1,000 in additional catch-up contributions for people age 55 or older.

The annual maximums are adjusted annually by the IRS as part of their inflation-indexing process (Rev Proc 2009-29). The additional catch-up amount for people age 55 or older is set by statute in Internal Revenue Code Section 223. This additional catch-up amount reached its full $1,000 amount in 2009, and so the catch-up amount will not increase further unless Congress changes the law.

I also wish to point out two interesting things I noticed about HSAs recently. Normally funds inside an HSA cannot be used to pay for insurance premiums. Except: HSA funds can be used to pay for

•COBRA premiums,
•health insurance premiums during any period for which you're receiving unemployment benefits, or
•health insurance premiums if you're age 65 or older (other than Medigap and other Medicare supplemental policies).

So for people who are currently unemployed, you might be able to tap into your health savings account to help pay for your health insurance coverage.

The second thing I recently noticed about health savings accounts: no where do the rules say you need "earned income" to be eligible for an HSA. In other words, even "unearned income" such as interest, capital gains, or unemployment benefits can be offset by using the HSA deduction. (Earned income is a technical phrase meaning income from wages or self-employment.)

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