Contributing to a Health Savings Account-Kiplinger

Ask Kim


Contributing to a Health Savings Account

Kimberly Lankford

There’s still time to make 2012 contributions to these versatile accounts.



Can I still make contributions to my health savings account for 2012? I’m wondering if the deadline is April 15, 2013, like it is for IRAs, or if I had to make the contributions by December 31?

SEE ALSO: 6 Tips to Spend Less on Health Care

It’s not too late to contribute to a health savings account for 2012. You have until April 15, 2013, to contribute up to $3,100 for 2012 if you have individual health insurance coverage, or up to $6,250 if you have family coverage. You can contribute an extra $1,000 for the year if you’re 55 or older.

To qualify to make HSA contributions, your health insurance policy must have had a deductible of at least $1,200 for individual coverage or $2,400 for family coverage in 2012 (the numbers are all slightly higher for 2013). Also, you can’t contribute to an HSA after you sign up for Medicare, but you can still use money from the account tax-free for eligible medical expenses at any age. (See How to Make HSA Contributions After Age 65 for more information about the rules for forgoing signing up for Medicare in order to continue making HSA contributions.)

Advertisement

It’s easiest to make the extra contributions if you buy health insurance on your own. In that case, you’d just add money to the account and deduct the contributions for 2012 when you file your taxes – like you would with a tax-deductible IRA. It can be a bit trickier if you have employer coverage and usually make pretax HSA contributions from your paycheck. Employers generally don’t permit payroll-deducted contributions after year-end, says Will Applegate, vice-president of Fidelity Investments, which administers many employers’ HSAs. But employees who want to contribute after December 31 can do so on an after-tax basis (similar to making a bank deposit) and can take a tax deduction for that portion of their contribution when they file their taxes, he says. Contact your HSA administrator for its specific procedure. "It will be much like how you would make a deposit to a bank account, which could be online or by mailing a check with a deposit slip," says Applegate.

Contributing to an HSA gives you a triple tax break. Your contributions are pretax (or tax-deductible), the money grows tax-deferred, and it can be used tax-free for out-of-pocket medical expenses in any year. You can use the money to pay your health insurance deductible, co-payments for medical care and prescription drugs, or bills not covered by insurance, such as vision and dental care.

You don’t have to use the money by the end of the year. You can keep it in the account growing tax-deferred for future expenses, and you can even use it to reimburse yourself for the money that Social Security withholds from your benefits to pay for Medicare Part B. You can also use HSA funds for Medicare Part D and Medicare Advantage (but not medigap) premiums, or for a portion of your long-term-care insurance premiums. If you use HSA money for nonmedical expenses, you’ll have to pay taxes on it (plus a 20% penalty before age 65).

Got a question? Ask Kim at askkim@kiplinger.com.



Editor's Picks From Kiplinger


You can get valuable updates like Ask Kim from Kiplinger sent directly to your e-mail. Simply enter your e-mail address and click "sign up."

More Sponsored Links


DISCUSS

Permission to post your comment is assumed when you submit it. The name you provide will be used to identify your post, and NOT your e-mail address. We reserve the right to excerpt or edit any posted comments for clarity, appropriateness, civility, and relevance to the topic.
View our full privacy policy


Advertisement

Market Update

Advertisement

Featured Videos From Kiplinger