How Much Can You Contribute to a Health Savings Account?

Question: I was working part-time for the first few months of 2017 and bought my own high-deductible health insurance policy. But then I started a new job last May and switched to my employer’s health insurance plan, which has a much lower deductible. Can I still contribute to a health savings account for the part of 2017 when I had the high-deductible health insurance policy? If so, how much can I contribute?

Answer: As long as you had an HSA-eligible health insurance policy in 2017 with a deductible of at least $1,300 for single coverage or $2,600 for family coverage, you still have until April 17, 2018, to contribute to a health savings account based on the number of months you had eligible coverage. If you had an HSA-eligible policy for the first four months of the year, for example, you can contribute up to one-third of the maximum contribution limit for the year.

The maximum contribution for the full year in 2017 was $3,400 for single coverage or $6,750 for family coverage (plus $1,000 if you were age 55 or older). If you were younger than 55 and had an eligible policy for four months that covered yourself only, you can contribute up to $1,133. If you had family coverage, you can contribute up to $2,250. You’ll be able to deduct your contributions when you file your 2017 tax return. Or if you have already filed, you can submit an amended return to deduct your contributions. (You’ll need to submit IRS Form 8889 along with your 1040.)

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Though your maximum contributions are generally prorated based on the number of months you had eligible coverage, there is one tricky exception. If you had an HSA-eligible health insurance policy on December 1, then you can make the full year’s contribution—even if you only had eligible coverage for the last few months of the year. Say, for example, you had the HSA-eligible policy for the last four months of the year, including December 1. You could actually make the full year’s contribution of $3,400 for single coverage or $6,750 for family coverage for 2017. Here’s the tricky part: You must keep an HSA-eligible policy for all of the following year. Otherwise, any contributions you made beyond the four months in which you actually had coverage must be reported as income on your tax return—with a 10% penalty on top.

For more information about this complicated rule, see pages five and six of IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Also see the Instructions for IRS Form 8889, Health Savings Accounts.