8748. What are the contribution limits to an HSA?Alexis Longrcline212015-05-13T15:26:00Z2015-05-13T15:26:00Z36973976Summit Business Media3394664148748. What are the contribution limits to an HSA?An eligible individual may deduct the aggregate amount paid in cash into an HSA during the taxable year up to the annual limitation amount. In 2014, an individual can deduct up to $3,300 for self-only coverage and $6,550 for family coverage..IRC Secs. 223(a), 223(b)(2); Rev. Proc. 2012-26. For 2015 and 2016, the self-only contribution limits increase to $3,350. The family coverage limit in 2015 is $6,650 and $6,750 for 2016..Rev. Proc. 2013-25, 2013-21 IRB 1; Rev. Proc. 2014-30, 2014-30 CB 1009.For years prior to 2007, the allowable contribution and deduction were limited to the lesser of the deductible under the applicable HDHP or the indexed annual limits for self-only coverage or family coverage..IRC Sec. 223(b)(2), prior to amendment by TRHCA 2006.The determination of whether a plan offers self-only or family coverage is made as of the first day of the month. The limit is calculated on a monthly basis and the allowable deduction for a taxable year cannot exceed the sum of the monthly limitations. See Q 8749 for a discussion of the individual requirements for HSA eligibility. An example illustrating calculation of the HSA contribution limit is provided below.Example: Lola has self-only coverage under an HDHP in 2014 and wishes to contribute to an HSA. She has been an eligible individual for all of 2014, so her monthly contribution for self-only coverage is calculated by dividing the 2014 annual limit ($3,300) by the 12 months in her eligibility period. Lola can contribute $275 per month in 2014. If Lola was only an eligible individual for the first eight months of 2014, she still must first calculate her monthly contribution based on a 12-month year. However, her annual contribution limit is prorated to $2,200 (her monthly $275 limit multiplied by the eight months of eligibility). Although the annual contribution level is determined for each month, Lola is entitled to contribute her entire annual contribution amount in a single payment, if desired..IRC Sec. 223(b); Notice 2004-2, 2004-1 CB 269, A-12. If Lola had been an eligible individual for the last month of 2014, she would have been treated as though she were an eligible individual for the entire year.Individuals who attain age fifty-five before the close of a taxable year are eligible for an additional “catch-up” contribution amount over and above that calculated under IRC Section 223(b)(1) and IRC Section 223(b)(2). The additional contribution amount is $1,000 for 2009 and later years..IRC Sec. 223(b)(3). In 2015, this would allow individuals age fifty-five and older to contribute up to $4,350 and the total contribution for a family would be $7,650.An individual who becomes an eligible individual after the beginning of a taxable year and who is an eligible individual for the last month of the taxable year is treated as being an eligible individual for the entire taxable year. For example, a calendar-year taxpayer with self-only coverage under an HDHP who became an eligible individual for December 2015 would be able to contribute the full $3,350 to an HSA in that taxable year. If a taxpayer fails at any time during the following taxable year to be an eligible individual, the taxpayer must include in his or her gross income the aggregate amount of all HSA contributions made by the taxpayer that could not have been made under the general rule. The amount includable in gross income also is subject to a 10 percent penalty tax..IRC Sec. 223(b)(8).For married individuals, if either spouse has family coverage, then both spouses are treated as having family coverage and the deduction limit is divided equally between them, unless they agree on a different division. If both spouses have family coverage under different plans, both spouses are treated as having only the family coverage with the lowest deductible..IRC Sec. 223(b)(5).An HSA may be offered in conjunction with a cafeteria plan. Both a HDHP and an HSA are qualified benefits under a cafeteria plan..IRC Sec. 125(d)(2)(D).Employer contributions to an HSA are treated as employer-provided coverage for medical expenses to the extent that contributions do not exceed the applicable amount of allowable HSA contributions..IRC Sec. 106(d)(1). Further, an employee is not required to include any amount in income simply because the employee may choose between employer contributions to an HSA and employer contributions to another health plan..IRC Secs. 106(b)(2), 106(d)(2).An individual may not deduct any amount paid into an HSA. Instead, that amount is excludable from gross income under IRC Section 106(d)..See IRC Sec. 223(b)(4).No deduction is allowed for any amount contributed to an HSA with respect to any individual for whom another taxpayer may take a deduction under IRC Section 151 (on dependency exemptions) for the taxable year..IRC Sec. 223(b)(6). See Q 8749 to Q 8753 for the rules governing employer contributions to employee HSAs. See Q 8756 for a discussion of the treatment of HSA distributions.