HSA Contribution Rules
How much can I contribute to my Health Savings Account (HSA)?
For 2018, the annual contribution limit for single tax filers for an HSA is $3,450. If you file taxes as a family, it is $6,850. You can make contributions until April 15 for the previous year. Filers over age 55 can add an additional $1,000 toward the annual contribution.
In previous years, contribution limits were as follows:
||Single Contribution Limit
||Family Contribution Limit
||Over 55 Catch-up Limit
What are the catch-up contribution rules?
The catch-up provision for people over age 55 is $1,000. This means if you are aged 55 or over, you can add an additional $1,000 toward the annual contribution. This means for 2018 you can contribute up to $4,450 for a single filer and $7,900 for a family if you are 55 or older, with only one HSA.
In the case where both spouses open an HSA, and are both over 55, the annual family maximum contribution could reach $8,900.
How can I make contributions to my HSA?
You can make direct deposits to your HSA (or through your employer, if that is available to you). Contributions need to be made in the form of cash; they can’t be made in the form of stock or other property. For any given year, you can make contributions until April 15 for the previous year.
Who can contribute to an HSA?
Any eligible individual may contribute to an HSA. Anyone, including your family or employer may contribute to your HSA. Contributions can be made via payroll deduction (if available), or by after-tax contributions.
If a family member or anyone else makes a contribution to your HSA, the tax advantages apply to you and not the person making the contribution. You may deduct the contribution amount when filing your annual income taxes in the same way you would if you had deposited the post-tax contribution on your own. All contributions to the account are combined, and are subject to maximum annual contribution limits.
HSA Tax Considerations and Guidelines
What are the tax advantages of an HSA?
Using an HSA offers tax savings in three ways (the so-called "triple-tax benefits"):
- The money you put in your HSA account is tax deductible.
- Funds in your account grow tax-free.
- You don’t pay taxes on distributions when paying for qualified medical expenses.
When can I make HSA contributions? Is there a contributions deadline for a taxable year?
Contributions can be made at any time. You can make the maximum contribution on the first day of the year, or you can spread your contributions throughout the year. For calendar year taxpayers, the deadline for HSA contributions is generally April 15 of the following year.
Using an HSA
How can I access my HSA?
The custodian administering your HSA will provide a debit card. You may be able to order checks. You can use your debit card or your checks (if available) to pay for any qualified medical expense.
Are health insurance premiums qualified medical expenses?
In most cases, premiums are not considered qualified medical expense. However, there are some exceptions:
- Premiums for qualified long-term care insurance
- Premiums for COBRA healthcare continuation coverage
- Health insurance premiums while an individual receives unemployment compensation
- For individuals over age 65:
- Medicare Part A or B premiums
- Medicare HMO premiums
- An employee’s premium share for employer-sponsored health insurance (including premiums for employer-sponsored retiree health insurance)
Please note: Premiums for Medigap policies are not qualified medical expenses.
How can I invest my HSA?
Health Savings Accounts may be invested like a 401K or IRA in an interest bearing account, mutual funds, stocks or bonds. These options vary by HSA custodian. Most custodians require a minimum amount to be in liquid form before investments to provide access to funds you may need to pay qualified medical expenses.
Other HSA Rules
What happens to the account at the end of the year?
Your account balance can be carried over year after year without any limits. Unlike other types of accounts, such as flexible spending accounts (FSA), these accounts are not “use it or lose it” accounts. The account can continue to grow in value.
What happens to my HSA when I pass away?
Your HSA is an inheritable account. What happens to your HSA when you die depends on who you named as your beneficiary:
- Spouse designated beneficiary: If your spouse is your designated beneficiary, the account will be treated as your spouse's HSA after your death. The account will continue to be tax-free for qualified medical distributions. If your spouse is covered by a qualified high deductible health plan, contributions to the account may also be made tax-free, up to maximum annual contribution limits.
- Other than spouse designated beneficiary: If you designate someone other than your spouse as the beneficiary of your HSA, the account stops being an HSA on the date of your death, the fair market value of the HSA becomes taxable in the year in which you die (without penalties), and the amount taxable to a beneficiary (other than your estate) is reduced by any qualified medical expenses you incurred prior to your death are paid from the HSA by the beneficiary within one year after the date of your death.
- Your estate is the beneficiary: If your estate is the beneficiary of your HSA, the value of your account is included on your final income tax return.
- No designated beneficiary on file: If you don't have a beneficiary on file, the funds are payable to your estate.