I have an HSA account that was opened when my employer switched to a high-deductible policy. My pre-tax deductions were deposited in the HSA from my paycheck. I have moved to another employer that does not offer a high-deductible policy. Can I still contribute to the HSA? If so, are the contributions tax-deductible? Can I still pay health-related costs from the HSA?
You can make health savings account contributions only for the months that you were covered under a qualified high-deductible health insurance policy. But if you didn't make the maximum contributions that were allowed when you were eligible, then you may still be able to contribute the remainder of the money, says Roy Ramthun, president of HSA Consulting Services in Washington, D.C.
For example, if you had HSA-qualified coverage from January 1 to April 31, 2008, then you were eligible to make four months' worth of contributions. The maximum contribution limit for 2008 is $2,900 for people who are not yet age 55 with individual coverage. So you could contribute $966.67 (4/12 of $2,900). If you only had $200 taken out of your paycheck every month for the HSA ($800 total), then you can still contribute $166.67 to your HSA for 2008, says Ramthun.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Because your contributions are no longer subtracted from your pay before taxes, you'll need to deduct those extra contributions when you file your 2008 income tax return (the last day for making 2008 contributions will be April 15, 2009).
Good news on the second half of your question: You can always use money from an existing HSA tax-free to pay out-of-pocket medical expenses in any year, even if you can't make new contributions, as long as the expenses were incurred after you opened the HSA.
For more information about HSAs, see Health Savings Account Answers.
-
Seven Steps Couples Should Take Before Blending Their FinancesGetting on the same page now can ensure you remain successful throughout your relationship.
-
Charitable Remainder Trust: The Stretch IRA AlternativeThe SECURE Act killed the stretch IRA, but a properly constructed charitable remainder trust can deliver similar benefits, with some caveats.
-
Credit Report Error? They All Mattercredit & debt Don't dismiss a minor error. It could be the sign of something more serious.
-
Insurance for a Learning Driverinsurance Adding a teen driver to your plan will raise premiums, but there are things you can do to help reduce them.
-
529 Plans Aren’t Just for Kids529 Plans You don’t have to be college-age to use the money tax-free, but there are stipulations.
-
When to Transfer Ownership of a Custodial Accountsavings Before your child turns 18, you should check with your broker about the account's age of majority and termination.
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
-
When It Pays to Buy Travel Insurance
Travel Investing in travel insurance can help recover some costs when your vacation gets ruined by a natural disaster, medical emergency or other catastrophe.
-
It’s Not Too Late to Boost Retirement Savings for 2018
retirement Some retirement accounts will accept contributions for 2018 up until the April tax deadline.
-
How to Correct a Mistake on Your RMDs from IRAsretirement If you didn't take out the correct required minimum distribution because your brokerage firm made a mistake, the IRS may show some leniency.
