Question: In March, you wrote that the IRS reduced the maximum amount a family could contribute to a health savings account for 2018 after it had announced a higher limit months earlier. Did the IRS ever do anything more on this for those who already contributed the higher amount?
Answer: Yes, the IRS just issued a revenue procedure relaxing the rules and is allowing people with HSA-eligible family coverage to contribute up to $6,900 to their HSAs in 2018, rather than the $6,850 limit that was announced in March. If you already contributed the full $6,900 for the year, you won’t need to withdraw the excess contributions. If you withdrew the extra $50, you can put it back into the account without taxes or penalties. And if you haven’t made your contribution yet, you can contribute up to $6,900, too.
The limits had been changed because the IRS recalculated the inflation adjustment used to determine the maximum HSA contributions for the year. The new tax law requires the IRS to calculate the inflation adjustment using a different version of the Consumer Price Index (called the “chained CPI”), which has grown at a slower rate than the CPI version used in the past.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The $6,900 limit for 2018 had been announced before the new tax law was passed last year. After the limit was recalculated downward months later, this created a complicated situation for people who had already contributed the full $6,900. They faced having to withdraw the extra $50 before next April 15 unless the IRS relaxed the rules for the year.
Because many people had already contributed the full $6,900 or set their payroll deductions for the year based on the higher amount, the IRS is allowing people to contribute up to $6,900 for 2018. Future inflation adjustments will build upon the $6,850 limit. The maximum contribution limits for 2019 should be released by June 1, says Roy Ramthun, president of HSA Consulting Services.
The maximum contribution limit for people with single health insurance coverage didn’t change when calculated with the chained CPI. It stays at $3,450 for 2018. And the catch-up contribution for people who are 55 or older this year remains at $1,000.
-
Credit Report Error? They All Mattercredit & debt Don't dismiss a minor error. It could be the sign of something more serious.
-
Insurance for a Learning Driverinsurance Adding a teen driver to your plan will raise premiums, but there are things you can do to help reduce them.
-
Getting Out of an RMD Penalty
retirement When your brokerage firm miscalculates your required minimum distributions, you have recourse.
-
529 Plans Aren’t Just for Kids529 Plans You don’t have to be college-age to use the money tax-free, but there are stipulations.
-
When to Transfer Ownership of a Custodial Accountsavings Before your child turns 18, you should check with your broker about the account's age of majority and termination.
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
-
When It Pays to Buy Travel Insurance
Travel Investing in travel insurance can help recover some costs when your vacation gets ruined by a natural disaster, medical emergency or other catastrophe.
-
It’s Not Too Late to Boost Retirement Savings for 2018
retirement Some retirement accounts will accept contributions for 2018 up until the April tax deadline.
