What happens if I become eligible to contribute to an HSA mid-year (not January 1st)? What is my maximum contribution?
The Tax Relief and Health Care of Act of 2006 changed the rules so you can now make a full year’s contribution into the HSA, if you want to. If you make a contribution for the full year when you only had partial year HSA-eligibility, you must remain HSA-eligible through the last month of the following calendar year to avoid tax and penalty. To be HSA-eligible, you must be covered by a HSA-qualified high deductible health plan and not be covered by any non-qualified health plans. Failure to maintain HSA eligibility (for reasons other than death or disability) for the required amount of time will result in income tax and a 10% additional tax on the contribution amounts attributable to the months before you had HDHP coverage and were HSA eligible. If you think you may not remain HSA-eligible for the required amount of time, you may choose to make a partial year contribution (maximum contribution divided by 12 months multiplied the number of months eligible) to avoid taxes and penalty. Can
Related Questions
- Are employers who contribute to an employee’s HSA responsible for determining whether the employee is an eligible individual and the employee’s maximum annual contribution limit?
- If I enroll in the HDHP after January 1 but by December 1, can I still contribute the maximum annual HSA contribution for that year?
- What happens if I become eligible to contribute to an HSA mid-year (not January 1st)? What is my maximum contribution?
