A Health Savings Account (HSA) is a custodial account to pay or reimburse medical expenses for individuals with high deductible health plans (HDHP). Maintaining an HSA provides numerous tax advantages. A tax deduction is allowed for contributions to an HSA and distributions to pay for medical costs are tax-free. For more information about HSAs, read IRS Publication 969.
A significant change for Wisconsin residents in 2011 is that Wisconsin treatment of an HSA now follows the federal tax treatment. In previous years, Wisconsin did not allow the deductions for HSA contributions, so the federal deduction was added back to Wisconsin income and interest on the account was taxable in Wisconsin. Beginning January 1, 2011, Wisconsin Act 1 brought Wisconsin in line with federal HSA tax rules. For more information about tax treatment of HSAs in Wisconsin, visit the Department of Revenue's HSA news release.
Beginning in 2011, the penalty on HSA distributions that are not for qualified medical expenses has increased from 10% to 20%. If subject to the federal penalty, Wisconsin filers receive a state penalty equal to 33% of the federal penalty.
The following table shows the deductible and expense information for HDHPs. While the amounts stayed the same from 2010 to 2011, the maximum annual contributions and out-of-pocket expenses for 2012 show cost of living increases:
Health Savings Accounts (HSAs)
2010
2011
2012
Self-only Plans
Minimum deductible
$1,200
$1,200
$1,200
Maximum deductible
$3,050
$3,050
$3,100
Maximum out-of-pocket expenses
$5,950
$5,950
$6,050
Family Plans
Minimum deductible
$2,400
$2,400
$2,400
Maximum deductible/contribution
$6,150
$6,150
$6,250
Maximum out-of-pocket expenses
$11,900
$11,900
$12,100
Catch-up Contribution
(self or family, age 55 or older)
$1,000
$1,000
$1,000
To ensure compliance with Treasury Circular 230, we are required to inform you that any advice concerning U.S. federal tax issues contained on this website is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code and was not written to support the promotion or marketing of any transaction or matter discussed herein. Application of tax regulations is specific to the individual or business and we recommend that you consult a qualified Komisar Brady tax professional for how the above information may apply to you.
