The U.S. Internal Revenue Service (IRS) allows an eligible individual with a Health Savings Accounts (HSA) who turns 55 or older before his tax year-end to make a catch-up contribution of up to $1,000. Catch-up contributions increase the existing annual limits on HSA contributions.
Health Savings Accounts
HSAs are available for individuals who participate in high-deductible health plans that have higher annual deductible amounts compared to typical health plans and maximum limits on the combined annual deductibles and out-of-pocket medical expenses. To be eligible for an HSA, an individual cannot be covered by Medicare, have any other general health coverage or be claimed as a dependent.
An HSA must be opened and maintained with a trustee. Contributions to an HSA can be deducted from taxes even if an individual does not itemize his deductions. The annual limit for contributions in 2015 is $3,350. If an individual is enrolled in a family high-deductible health plan, the maximum annual contribution is $6,650 in 2015. Distributions from an HSA can be tax-exempt if the money is spent on qualified medical expenses.
Qualified Medical Expenses
If an individual spends his HSA funds on disallowed medical expenses, he faces a tax liability and an additional 20% tax penalty. Qualified medical expenses must be disbursed to cover medical and dental procedures that treat and alleviate specific medical conditions. Qualified medical expenses include a doctor’s examination associated with disease, prescription drugs and various dental treatment procedures. Any expenses that promote general health and appearance are not allowed, including gym memberships, health club fees, teeth whitening, supplements or cosmetic surgery.