Can I Contribute to an HSA in December If My Coverage Starts in January?

Yes, you can contribute to a Health Savings Account (HSA) in December even if your coverage starts in January. This is because HSA contributions are prorated based on the number of months you are eligible to contribute during the year.

Here's how it works:

• You can make HSA contributions for the current tax year until the tax filing deadline, usually April 15th of the following year.
• If you are eligible to contribute for a partial year, such as starting coverage in January, your maximum contribution limit will be prorated based on the number of months you are covered by an HSA-qualified high deductible health plan (HDHP).
• In the case of starting coverage in January, you would be considered eligible for 1/12th of the annual contribution limit for that tax year.
• For 2021, the annual contribution limit for individuals with self-only HDHP coverage is $3,600 and for those with family HDHP coverage is $7,200.
• Thus, if you begin coverage in January, you can contribute 1/12th of the annual limit for the tax year.
• It's important to keep track of your HSA contributions to ensure you do not exceed the prorated limit for the year, as excess contributions may be subject to taxes and penalties.

Absolutely, you are allowed to make contributions to your Health Savings Account (HSA) in December even if your coverage only begins in January. This is because HSA contributions are calculated based on the months you are eligible during the tax year.

Moreover, there are important details to note:

• HSA contributions can still be made until the tax deadline, which is typically April 15th of the following year.
• If your insurance coverage starts in January, you will be eligible for a prorated contribution limit that reflects your coverage period.
• Your eligibility for the year will be calculated as 1/12th of the annual contribution limit if you begin coverage in January.
• For the year 2021, the contribution cap for individuals with self-only HDHP coverage is $3,600, while families can contribute up to $7,200.
• This means that if your coverage begins in January, you can contribute up to 1/12th of the annual limit of that tax year.
• It’s crucial to monitor your HSA contributions diligently to avoid exceeding the prorated limits, as excess contributions may incur tax penalties.