HSA Contributions Partial Year: What You Need to Know

Health Savings Accounts (HSAs) are a valuable tool for saving money on healthcare expenses while enjoying tax benefits. But what happens if you start an HSA account partway through the year? Can you still make contributions?

When it comes to HSA contributions for a partial year, there are a few key points to keep in mind:

• If you are eligible to open an HSA for only part of the year, you can still make contributions, but the amount you can contribute will be prorated based on the number of months you are eligible.
• For example, if you become eligible for an HSA in July, you can contribute half of the annual contribution limit for that year.
• It's important to note that HSA contribution limits are set by the IRS each year. For 2021, the annual contribution limit for individuals is $3,600 and $7,200 for families.
• If you are 55 or older, you can make an additional catch-up contribution of $1,000 per year.
• Contributions made by your employer also count towards your annual limit.

It's essential to keep track of your contributions throughout the year to ensure you do not exceed the annual limit. Excess contributions may be subject to taxes and penalties.

Remember, HSAs offer a triple tax advantage: contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are tax-free. Taking advantage of an HSA, even for part of the year, can help you save money and plan for future healthcare expenses.

Health Savings Accounts (HSAs) are instrumental in allowing individuals to save smartly on healthcare costs while receiving excellent tax perks. If you find yourself asking, 'What if I only open my HSA partway through the year?', the good news is that you can still make contributions. Just remember: your contribution limits will be adjusted according to your period of eligibility.