Publication 969 - Introductory Material


What's New

Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs). Notice 2013-54, 2013-40 I.R.B. 287, available at www.irs.gov/irb/2013-40_IRB/ar11.html, and Notice 2015-17, provides guidance for employers on the application of the Affordable Care Act (ACA) to Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs).For more information on the Affordable Care Act, go to IRS.gov and enter “Affordable Care Act” in the search box.

Reminders

Future Developments. For the latest information about developments related to Publication 969, such as legislation enacted after it was published, go to www.IRS.gov/pub969.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Federal tax benefits for same-sex married couples.  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. For more information, see Publication 501.

Health flexible spending arrangements (FSAs). The following rules apply to health FSAs for plan years beginning after December 31, 2012.

  • Salary reduction contributions to your health FSA cannot be more than $2,500 a year (indexed for inflation).

  • Your employer may choose to change your cafeteria plan to allow you to carry over up to $500 of unused amounts remaining at the end of the plan year in a health FSA to be paid or reimbursed for qualified medical expenses incurred during the following plan year. For more information, see Balance in an FSA under Flexible Spending Arrangements (FSAs), later.

Introduction

Various programs are designed to give individuals tax advantages to offset health care costs. This publication explains the following programs.

  • Health savings accounts (HSAs).

  • Medical savings accounts (Archer MSAs and Medicare Advantage MSAs).

  • Health flexible spending arrangements (FSAs).

  • Health reimbursement arrangements (HRAs).

An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual. Contributions, other than employer contributions, are deductible on the eligible individual's return whether or not the individual itemizes deductions. Employer contributions are not included in income. Distributions from an HSA that are used to pay qualified medical expenses are not taxed.

An Archer MSA may receive contributions from an eligible individual and his or her employer, but not both in the same year. Contributions by the individual are deductible whether or not the individual itemizes deductions. Employer contributions are not included in income. Distributions from an Archer MSA that are used to pay qualified medical expenses are not taxed.

A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is enrolled in Medicare. Contributions can only be made by Medicare. The contributions are not included in your income. Distributions from a Medicare Advantage MSA that are used to pay qualified medical expenses are not taxed.

A health FSA may receive contributions from an eligible individual. Employers may also contribute. Contributions are not includible in income. Reimbursements from an FSA that are used to pay qualified medical expenses are not taxed.

An HRA must receive contributions from the employer only. Employees may not contribute. Contributions are not includible in income. Reimbursements from an HRA that are used to pay qualified medical expenses are not taxed.

Comments and suggestions.    We welcome your comments about this publication and your suggestions for future editions.

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  Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.

Ordering forms and publications.    Visit www.irs.gov/formspubs to download forms and publications. Otherwise, you can go to www.irs.gov/orderforms to order forms or call 1-800-829-3676 to order current and prior-year forms and instructions. Your order should arrive within 10 business days.

Tax questions.    If you have a tax question, check the information available on IRS.gov or call 1-800-829-1040. We cannot answer tax questions sent to the above address.


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