Contributions to your HSA can be made by an
eligible individual, the individual's employer, the
individual's family members, and any other person.
Contributions made by the individual are deductible from
the individual's adjusted gross income. Contributions
made by the individual's employer are excluded from the
individual's income and are not taxable to the
individual. Contributions from all sources are
aggregated for purposes of applying the maximum annual
contribution limit described below.
contributions to an employee's HSA are excludable from the
employee's gross income, up to the maximum contribution
limit for that employee. Although the employee cannot deduct
the employer's HSA contributions, the contributions are not
taxable to the employee nor are they subject to withholding
from wages for income tax or other employment taxes.
Contributions for any taxable year can be made in one or more
payments, at any time prior to the deadline, without extensions, for filing your
federal income tax return for that year, but not before the beginning of that
year. For calendar year taxpayers, this deadline for contributions is generally
April 15 following the year for which the contributions are made.
An "excess contribution" (a contribution made by you or
your employer that exceeds the amount allowed by law) is
not deductible by you or your employer and is included
in your gross income if made on your behalf by your
employer. An excise tax of 6% for each taxable year is
imposed on excess individual and employer contributions.
If the excess contributions for a taxable year and the
net income attributable to such excess contributions are
paid or distributed to you before the deadline
(including extensions) for filing your federal income
tax return for the taxable year, then the net income
from the excess contributions is included in your gross
income for the taxable year in which the distribution is
received. However, the excise tax would not be imposed
on the excess contributions nor would the distribution
of the excess contributions be taxed. Allowable rollover
contributions do not count in determining whether an
excess contribution has been made.
In general, the maximum annual contribution to an HSA is
the sum of the limits determined separately for each
month, based on status, eligibility, and health plan
coverage as of the first day of the month. Although the
maximum annual contribution limit is determined on a
monthly basis, there is no actual monthly limit on the
amount that may be contributed. If an individual was
under age 55 at the end of the year, and was an eligible
individual on the first day of every month during the
with the same self-only HDHP coverage, the HSA annual
maximum contribution limit is $3,250 for individuals and $6,450 for
family coverage. In 2014, those limits change to $3,300
The most you can put into your account for 2013 is $3,250 if you have single coverage and $6,450 for a family.
In 2014, the limits are $3,300 and $6,550. These amounts will be increased for inflation in future years.
An exception is provided for an individual who becomes HSA-eligible after the beginning of a taxable year who does
not establish and HDHP as of the beginning of such year, generally January 1. In general, for tax years beginning
after 2006, an individual who becomes covered under an HDHP in a, month other than January may be permitted to make
the full HSA contribution for the year. An individual who is an eligible individual during the last month of a taxable
year is treated as having been an eligible individual during every month during the taxable year for purposes of computing
the amount that may be contributed to the HSA for the year. As a result, such individual is allowed to make contributions,
including catch-up contributions for months before the individual was enrolled in an HDHP. If an individual makes contributions
under the exception and does not remain an eligible individual during the testing period, the amount of the contributions
attributable to months preceding the month in which the individual was an eligible individual, which could not have been made
but for the provision, is includible in gross income. A 10 percent additional tax also applies to the amount includible.
An exception applies if the employee ceases to be an eligible individual by reason of death or disability. The testing period
is the period beginning with the last month of the taxable year and ending on the last day of the 12th month following such month.
The amount is includible for the taxable year of the first day during the testing period that the individual is not an eligible
Your personal contributions offer you an "above-the-line" deduction. An "above-the-line" deduction allows you to reduce your
taxable income by the amount you contribute to your HSA. You do not have to itemize your deductions to benefit. Contributions
can also be made to your HSA by others (e.g., relatives). However, you receive the benefit of the tax deduction.
If your employer offers a "salary reduction" plan (also known as a "Section 125 plan" or "cafeteria plan"), you (the employee) can make contributions to your HSA on a pre-tax basis (i.e., before income taxes and FICA taxes). If you can do so, you cannot also take the "above-the-line" deduction on your personal income taxes.
No. Self-employed persons may not contribute to an HSA on a pre-tax basis and may not take
the amount of their HSA contribution as a deduction for SECA purposes. However, they may
contribute to an HSA with after-tax dollars and take the above-the-line deduction.
You may be able to claim the medical expense deduction even if you contribute to an HSA. However, you cannot include any contribution to the HSA or any distribution from the HSA, including distributions taken for non-medical expenses, in the calculation for claiming the itemized deduction for medical expenses.
Not at this time. President Bush had proposed allowing individuals not covered by an employer plan to deduct their HDHP premiums as well as their HSA contributions. However, this proposal
was not enacted by Congress.
The government has allowed people over the age of 55 to
invest more than others into their HSAs through
"catch-up" contributions. This means that you are
allowed to invest additional money into your HSA for 2013
and 2014 of $1000. If you turn
55 during any of the years above, you can only
contribute a pro-rated amount based on the number of
full months you are 55. These contributions must stop
once you become eligible for Medicare.
HSAs are an evolutionary step from existing government
legislation creating medical savings accounts. A great deal
of bipartisan thinking that has gone into the passage, by
Congress and the President, of this law. Any law can be
modified or repealed. If anything, it appears that lawmakers
are focusing on ways to increase the tax benefits of owning
HSAs (such as tax credits for employers), not limiting them.
Any portion of your HSA that you pledge as security for a loan will be treated
as a distribution for the year the pledge is made. The amount pledged is includable
in your gross income and a 10% premature distribution penalty tax on the pledged
amount may also be imposed.
Tax advice concerning your HSA will not be provided. It is your sole responsibility
to determine the tax consequences of establishing an HSA. Please discuss any questions
you may have with your tax advisor or HDHP provider agent.
Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage.
The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds.
Funds deposited into your HSA remain in your account and automatically roll over from one year to the next.
You may continue to use the HSA funds for qualified medical expenses. You are no longer eligible to contribute
to an HSA for months that you are not an eligible individual because you are not covered by an HDHP. If you have
coverage by an HDHP for less than a year, the annual maximum contribution is reduced; if you made a contribution
to your HSA for the year based on a full year's coverage by the HDHP, you will need to withdraw some of the
contribution to avoid the tax on excess HSA contributions. If you regain HDHP coverage at a later date, you can
begin making contributions to your HSA again.
You can continue to use your account tax-free for out-of-pocket health expenses. When you enroll in Medicare,
you can use your account to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare.
If you have retiree health benefits through your former employer, you can also use your account to pay for your share
of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare
supplemental insurance or "Medigap" policy. Once you turn age 65, you can also use your account to pay for things
other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will
not be subject to any other penalties. Individuals under age 65 who use their accounts for non-medical expenses must
pay income tax and a 10% penalty on the amount withdrawn.
What happens depends on how the HSA is designed. If your
spouse is designated as the beneficiary by you, your
spouse becomes the owner of the HSA when you die. If you
provide that it goes to your estate or other entity, the
value of the HSA at death is income to the estate or