Dec 01, 2020
FSA, HSA, MSA, oh my! Here are the 2021 IRS announced limitations for various health care tax advantaged programs.
- For the taxable years beginning in 2021, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements (FSA) remains $2,750. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $550, an increase of $50 from taxable years beginning in 2020.
- FSA dependent care accounts are limited to $5,000 in 2021, the same as for 2020.
- Inflation-adjusted limits for deductible contributions to health savings accounts (HSAs) for 2021 are increasing. For family coverage, the contribution limit will be $7,200. For individual coverage, the limit rises $3,600. If you're 55 or older, you can contribute an additional $1,000, as in prior years. When you combine an HSA with a high-deductible health insurance plan, you can set aside pretax contributions that can be later withdrawn tax-free to pay unreimbursed medical expenses.
- For tax year 2021, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,400, up $50 from tax year 2020; but not more than $3,600, an increase of $50 from tax year 2020. For self-only coverage, the maximum out-of-pocket expense amount is $4,800, up $50 from 2020. For tax year 2021, participants with family coverage, the floor for the annual deductible is $4,800, up from $4,750 in 2020; however, the deductible cannot be more than $7,150, up $50 from the limit for tax year 2020. For family coverage, the out-of-pocket expense limit is $8,750 for tax year 2021, an increase of $100 from tax year 2020.
If you would like to discuss your specific situation, please reach out to any of the accountants at Terry Lockridge & Dunn. They can be reached in Cedar Rapids at 319-364-2945, or in Iowa City at 319-339-4884. We can meet via Zoom, conference call, or if necessary, in-person at either office.