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As we all continue to navigate the COVID-19 landscape, it can be hard to keep up with everything happening and changing, and equally easy to miss important updates that could stand to benefit you—including updates surrounding health savings accounts.
If you have an HSA, you need to be aware of two recent HSA updates that could impact your account for the past year and the year ahead:
In “normal” years, you typically have until Tax Day (April 15) to contribute funds toward your prior year maximum HSA annual contribution limit.
But this year, the IRS has extended the deadline to make HSA contributions for 2020 until May 17, 2021 to align with the amended tax filing deadline on the same day.
Long story short, that means you still have time to check your year-to-date HSA contributions for 2020 to ensure you’re not leaving savings on the table. Because remember, when it comes to your HSA—the more you contribute, the more you save.
Contributing the maximum HSA contribution limit to your account each year means you’re maximizing your tax savings upfront, as well as your ability to have the most tax-free money added to your HSA to save and invest for the long term.
|2020 Maximum HSA Contribution Limits|
|Additional Catch-Up for Age 55+||$1,000 on top of individual or family coverage limit|
It literally and figuratively pays to take the time before May 17 to check your 2020 HSA contributions. If you have a Bend HSA, you can quickly and easily check your 2020 HSA contributions—including any employer or other contributions—right from your account dashboard.
It’s important to note, the annual maximum HSA contribution limits include all contribution sources across all HSAs you may have open. So, if your employer or anyone else contributes to your HSA, or if you have more than one HSA that you’ve contributed to in 2020, be sure to take that into account so you don’t exceed your maximum HSA contribution limit.
If you end up still having room to contribute for 2020, now is the time. Depending on your HSA provider, either adjust your current contributions or make a one-time contribution to maximize your tax savings for 2020. Just be sure to work with your HSA provider to ensure the correct year is applied to your extra contributions so they’re attributed to 2020 and not 2021.
When you maximize your HSA contributions each year, you maximize your upfront tax savings.
But bigger picture, you also maximize your HSA investment potential—because an HSA is so much more than just a 12-month account.
With the right HSA contribution planning and strategy, you can turn your HSA into a tax-advantaged investment vehicle and a critical part of your long-term investment strategy, investing your HSA funds tax-free and letting them grow for future healthcare expenses—or any expenses for that matter—since HSA funds can be used for anything without penalty after you turn 65.
So remember, as tempting as it can be to make no or very minimal contributions to your HSA, you end up shortchanging yourself today and into the future.
Having an HSA is hands-down the best way to fund your current healthcare expenses while building equity for future healthcare (and other) expenses. In fact, leveraging an HSA is the only way to do so in such a tax-advantaged manner, with health savings accounts offering unrivaled tax benefits, as well as long-term saving and investment opportunities.
Carve out the time before May 17 to not only check your 2020 contributions, but also think over your HSA contribution strategy as a whole—and adjust your approach if needed. With the average amount a typical 65-year-old retired couple will need for healthcare expenses in retirement climbing to nearly $300,000 and continuing to rise, it’s never too early (or too late) to contribute to and invest in your HSA for a brighter financial future.
Along with the extended deadline to contribute HSA funds to your 2020 limit, HSA-eligible expenses have also been expanded recently—specifically expenses related to preventing the spread of COVID-19.
When the CARES Act was signed into law in late March of 2020, it offered some key expansions on how you can use your HSA throughout the coronavirus pandemic, and potentially beyond. This included immediate coverage for COVID-19 testing, care and vaccinations, along with coverage for telehealth and virtual healthcare services. Over-the-counter drugs and medical products, including feminine care products, were also added as HSA-eligible expenses—previously you needed a prescription for those to qualify.
If you’re looking for more details on what the CARES Act means for your HSA, we’ve got you covered.
Now, in addition to the CARES Act HSA expansions, the IRS has announced that personal protective equipment, including masks, hand sanitizer and sanitizing wipes, is now an HSA-eligible expense if purchased for the primary purpose of preventing the spread of COVID-19. This update applies to expenses for you, your spouse and tax dependents, and is retroactive to January 1, 2020.
Read the full IRS Announcement 2021-7 for complete details.
Don’t miss out on taking advantage of these newly HSA-eligible expenses, both for 2020 and 2021. And remember, with an HSA there’s no time limit for reimbursing yourself with tax-free dollars for any HSA-eligible expenses. So if you choose to wait to reimburse yourself, it’s no problem—just be sure to keep your receipts for when you’re ready.
Now more than ever, having an HSA saves you money on taxes, helps you take control of your healthcare costs and boosts your overall financial wellness both short and long-term. And choosing an HSA industry leader like Bend helps you maximize your HSA quickly, easily and without any headaches. From overall ease of use and personalized guidance, to unmatched investment options and superior customer service, Bend is here to make you an HSA pro and ensure you make the most of all your HSA benefits.