I'm very interested in opening up a health savings account and plan on buying a high-deductible health insurance policy in the next few months. How much money will I be able to contribute into the health savings account?

It depends on the size of your deductible, if the policy covers you or your entire family, your age and, most importantly, how early in the year you buy the health insurance policy. The sooner you sign up, the more you can deduct.

In general, you can contribute up to the amount of your health insurance deductible or $5,250 for family plans ($2,650 for individuals), whichever is less.

People 55 and older also an extra $600 catch-up contribution in 2005.

But you can only make the full contribution if you had a high-deductible health plan in place on January 1, 2005. You can't open the HSA until you buy the HSA-eligible health insurance, and your maximum contribution is reduced by 1/12 for every month you wait. If you don't buy the health insurance until July 1, for example, you'll only be allowed to contribute half of the maximum -- limiting your contribution (and income tax deduction) to $1,325 for individuals and $2,625 for family plans.

To qualify for an HSA, your health insurance coverage must carry a deductible of at least $1,000 for individuals, $2,000 for families.

For help finding an HSA-eligible health insurance policy, see the HSA Insider Web site or eHealthInsurance.com, which sells several companies' policies in most states. Many Blue Cross/Blue Shield plans also offer HSA-eligible policies (enter your zip code at the Blue Cross/Blue Shield association Web site to find your local BC/BS company).

For more information about health savings accounts, see our HSA FAQ.

MORE: Kiplinger.com | Your Money | Insurance | Column

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