Making HSA Contributions

HSAs are bank accounts where you can save money to help pay for almost any health-related expense.

What do you need to know about making contributions to your HSA?

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Making Tax-Free Contributions

Funds in a Health Savings Account are fully tax-free and tax-deductible. No matter how you contribute to your HSA, you'll be able to get these tax benefits.

There are 2 ways to save money in an HSA:

  • Deposit savings straight out of your paycheck. With your employer's cafeteria plan, you can put a portion of your paycheck directly into your HSA. The deposit happens before income taxes are taken out, so your contributions are tax-free.
  • After-tax deposits. If your employer doesn’t have fringe benefits or you're self-employed, you're not out of luck. You'll be able to reduce your taxable income by the amount you saved and get a refund on your next tax return.

Who can make contributions? Both you and your employer can deposit funds in an HSA. Any money deposited by an employer is yours to keep.

All Health Savings Accounts are provided by federally-qualified banks and credit unions. So making deposits and managing your HSA is just like having a regular bank account.

HSA Contribution Rules and Requirements

There's a maximum amount you're allowed to contribute per year to your Health Savings Account. That amount is determined by the Internal Revenue Service (IRS).

For 2012, the most that can be deposited for one year is $2,900 with individual health plans. The annual maximum for family plans is $5,800. This cap stays the same no matter what your plan's deductible is.

Any contribution made from you or an employer counts toward the maximum.

Before you hit the annual maximum, there are no federal requirements for how much or how little you can deposit each month. But you might have deposit or balance minimums with your bank, credit union, or insurance company.

To be eligible to contribute to an HSA, you must first be enrolled in a high-deductible health plan (HDHP) — a plan with a deductible of at least $1,100 for individual plans or $2,200 for family plans.

You'll have to be enrolled in the HDHP by December 1 to be HSA-eligible for the entire year. If your high-deductible plan starts in the middle of the year, the most you can contribute to your HSA is "pro-rated" — or reduced by the number of months you weren't enrolled in an HDHP.

If you deposit money into a Health Savings Account without high-deductible coverage or go over your "pro-rated" maximum, those contributions will be taxed like regular income and assessed a 10% tax penalty.

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