Important Federal Tax News Regarding Disability Income and Health Savings Accounts

Tax season might be over, but the tax accountants at Borland Benefield are still on the job keeping an eye on changes that might affect your taxes. Here are a couple of points to remember regarding taxes on disability income and the new contribution amounts for Health Savings Accounts in 2024.

Taxability of Disability Income

You must report as income on your tax return any amount you receive for a disability through an accident or health insurance plan paid for by your employer. If you paid the entire cost of a health or accident insurance plan, you don’t have to include the amounts you receive for your disability as income.

In one case, a taxpayer’s employer-provided disability insurance to employees and paid 100% of the premiums. The taxpayer received $105,000 in disability payments and didn’t report them on his joint return. The U.S. Tax Court ruled that the disability payments weren’t excludable from his gross income and, therefore, he owed $26,292 in tax and an accuracy-related penalty. (TC Summary Op. 2023-17)

Health Savings Accounts for 2024

Health Savings Accounts (HSAs) are tax-advantaged savings accounts funded with pretax dollars. Funds can be withdrawn tax-free to pay for qualified medical expenses. An HSA must be coupled with a high-deductible health plan (HDHP). The IRS annually adjusts HSA and HDHP amounts based on inflation.

For 2024, the HSA contribution amount for individuals is $4,150 ($3,850 for 2023) and $8,300 ($7,750 for 2023) for those with family coverage. The minimum HDHP deductible for individuals is $1,600 ($1,500 for 2023) and $3,200 for family coverage ($3,000 for 2023). The maximum HDHP out-of-pocket cost is $8,050 for self-coverage ($7,500 for 2023) and $16,100 for family coverage ($15,000 for 2023).

Steady. Accurate. Consistent.

Contact Us