The Internal Revenue Service issued its annual inflation adjustment for health savings accounts.

For 2021 the annual limitation on deductions for an individual with self-only coverage under a high deductible health plan is $3,600. That’s up from $3,550 in 2020.

For 2021 the annual limitation on deductions for an individual with family coverage under a high deductible health plan is $7,200.  That’s up from $7,100 in 2020.

For 2021 a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage.  Furthermore the annual out-of-pocket expenses (deductibles, co-payments and other amounts excluding premiums) do not exceed $7,000 for self-only coverage or $14,000 for family coverage.  For comparison these figures are $6,900 (self-only) and $13,800 (family) in 2020.

In a related item Congress reversed a provision of the Affordable Care Act (“Obamacare”) by writing into the CARES Act a provision allowing HSAs and flexible spending accounts to pay for over-the-counter drugs and medicine.