Government statistics for inflation have confirmed what consumers already know – the cost of everything is going up, by a lot! Americans have felt the pinch at the gas pump, the grocery store, and other aspects of our daily lives.
Fortunately, Health Savings Accounts offer some relief from higher inflation, and recent changes announced by the Internal Revenue Service (IRS) will help even more.
On June 10, 2022 the IRS announced that it would be increasing the personal mileage rates for several items, including for health care services. Effective July 1, the personal mileage rate for health care services will rise from 18 cents per mile to 22 cents per mile.
Health Savings Account owners may not realize it but they can already use their account funds tax-free to reimburse themselves for their personal mileage expenses associated with visits to the doctor, hospital, pharmacy, imaging center, medical laboratory and other places that provide health care services which we use. The higher mileage rate will help even more.
If you’re not already keeping track of your personal mileage associated with health care services you receive, you might want to start doing so. And if you’re not contributing the maximum to your Health Savings Account, you might want to deposit more funds into your Health Savings Account to help offset your higher expenses. Every bit helps lower your tax bill when it comes time to file your income tax return.
Speaking of making contributions to your Health Savings Account, the IRS also recently announced the largest increases to the annual deposit limits to your Health Savings Account in the history of the program, although they won’t go into effect until January 1, 2023. While that won’t help you immediately, it’s always good to plan ahead so you can budget for the maximum contributions you can afford for next year.
Remember, every dollar you contribute to your Health Savings Account lowers your taxable income by a dollar. Contribute $1,000 to your Health Savings Account and you will lower your taxable income by $1,000. If you’re not sure you can manage to deposit $1,000 now, you can wait until the end of the year to add up all your health-related expenses you paid this year. Don’t forget to include expenses for personal mileage as mentioned above.
Once you know how much you spent on health care in 2022, you can deposit more money in your Health Savings Account to cover the additional bills, assuming you haven’t already reached your contribution limit for 2022. Just make sure to deposit the money before your file your 2022 income tax return (no later than April 15, 2023).
If you’re not maximizing your Health Savings Account contributions, start doing so today. It’s best to get ahead of inflation while you can, and saving money through a Health Savings Account is one of the best tools available.