Tax Help - Health Savings Accounts

The Tax Relief and Health Care Act of 2006 made significant changes to Health Savings Accounts (HSAs).

The maximum contribution a taxpayer may contribute to an HSA is no longer limited to the annual deductible. A taxpayer may contribute up to $2,850 (individual) or $5,650 (family).

For taxpayers over the age off 55, the catch-up contribution amount has been raised to $800 for 2007.

Taxpayers may also now make the maximum contribution even if their high deductible health plan (HDHP) coverage begins after January. There are some racapture provisions that apply if the taxpayer ceases to be enrolled in an HDHP or otherwise becomes ineligible to participate in an HSA.

The Tax Relief and Health Care Act of 2006 allows for a one-time funding of an HSA from an IRA made in a direct trustee-to-trustee transfer. Also, a one-time transfer to an HSA of unused flexible spending account or health reimbursement account funds is now allowed.

Additional reading:

Publication 969 (2007): Health Savings Accounts and Other Tax-Favored Health Plans