CONTRIBUTING TO AN HSA
Synopsis by Dave Ballard Insurance
How much can I contribute to my HSA each year?
For 2007 and forward, your maximum annual HSA contribution is based on the statutory
limit for your type of coverage. For 2007, if you have self-only HDHP coverage,
your contribution is $2,850; $5,650 if family HDHP, no matter what your HDHP
deductible is. Before 2006, the contribution could not exceed the deductible
of your HDHP. If you are age 55 or older, you can also make additional “catch-up” contributions
(see below).
I have a very high deductible, is there a limit on how
much I can contribute?
The most you can put into your account
for 2007 is $2,850 if you have single coverage and $5,650. These
amounts will be increased for inflation in future years.
Do my HSA contributions have to be made in equal amounts
each month?
No, you can contribute in a lump sum
or in any amounts or frequency you wish. However, your account trustee/custodian
(bank, credit union, insurer, etc.) can impose minimum deposit and
balance requirements.
Does my contribution depend on when I establish my HSA
account or when my HDHP coverage begins?
Your eligibility to contribute to an
HSA is determined by the effective date of your HDHP coverage. Your
annual contribution depends your HDHP coverage. If you are not covered
on December 1, your contribution depends on the number of months
of HDHP coverage you have during the year (technically, the months
where you have HDHP coverage on the first day of the month). For
2007 and forward, if you are covered on December 1, you are treated
as an eligible individual for the entire year. However – if
you cease to be an eligible individual during 2008, the excess over
the pro rated contribution is included in income and subject to
a 10 percent additional tax. The amount you can contribute is not
determined by the date you establish your account. However, medical
expenses incurred before the date your HSA is established cannot
be reimbursed from the account.
Can my employer contribute to my HSA?
Contributions to HSAs can be made by
you, your employer, or both. All contributions are aggregated
to determine whether you have contributed the maximum allowed.
If your employer contributes some of the money, you can make up
the difference.
Do my contributions provide any tax benefits?
Your personal contributions offer you
an “above-the-line” deduction. An "above-the-line" deduction
allows you to reduce your taxable income by the amount you contribute
to your HSA. You do not have to itemize your deductions to benefit.
Contributions can also be made to your HSA by others (e.g., relatives).
However, you receive the benefit of the tax deduction.
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If my employer contributes to my HSA, does that also provide
me any tax benefit?
If your employer makes a contribution
to your HSA, the contribution is not taxable to you the employee
(excluded from income).
Can I make contributions through my employer on a “pre-tax” basis?
If your employer offers a “salary reduction” plan (also
known as a “Section 125 plan” or “cafeteria plan”),
you (the employee) can make contributions to your HSA on a pre-tax
basis (i.e., before income taxes and FICA taxes). If you can do
so, you cannot also take the “above-the-line” deduction
on your personal income taxes.
Can I claim both the “above-the-line” deduction
for an HSA and the itemized deduction for medical expenses?
You may be able to claim the medical
expense deduction even if you contribute to an HSA. However, you
cannot include any contribution to the HSA or any distribution from
the HSA, including distributions taken for non-medical expenses,
in the calculation for claiming the itemized deduction for medical
expenses.
I’m over 55 and would like to make catch-up contributions
to my HSA, like I’ve done with my IRA. Is that possible?
Yes, individuals 55 and older who are
covered by an HDHP can make additional catch-up contributions each
year until they enroll in Medicare. The additional “catch-up” contributions
to HSA allowed are as follows:
2006 - $700
2007 - $800
2008 - $900
2009 and after - $1,000
I turned 55 this year. Can I make the full “catch-up” contribution?
If you had HDHP coverage for the full
year, you can make the full catch-up contribution regardless of
when your 55th birthday falls during the year. If you did not
have HDHP coverage for the full year, you must pro-rate your “catch-up” contribution
for the number of full months you were “eligible”,
i.e., had HDHP coverage. However, if you are covered on December
1, you are treated as an eligible individual for the entire year
and get the full contribution.
If both spouses are 55 and older, can both spouses make “catch-up” contributions?
Yes, if both spouses are eligible individuals
and both spouses have established an HSA in their name. If only
one spouse has an HSA in their name, only that spouse can make
a “catch-up” contribution.
If each spouse has self-only HDHP coverage (neither spouse
has family coverage), how much can we contribute?
For 2007 and forward, each spouse is
eligible to contribute to an HSA in their own name, up to the statutory
limit ($2,850 for 2007). (The catch up contributions are in addition
to these limits.)
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If both spouses have family HDHP coverage but one spouse
has other coverage, are both spouses eligible for an HSA? How
much can each spouse contribute?
The following examples describe how much
can be contributed under varying circumstances. Assume that neither
spouse qualifies for “catch-up contributions”.
Example 1: Husband and wife have family
HDHP coverage with a $5,000 deductible. Husband has no other coverage.
Wife also has self-only coverage with a $200 deductible. Wife, who
has coverage under a low-deductible plan, is not eligible and cannot
contribute to an HSA. Husband may contribute $5,650 to an HSA.
Example 2: Husband and wife have family
HDHP coverage with a $5,000 deductible. Husband has no other coverage.
Wife also has self-only HDHP coverage with a $2,200 deductible.
Both husband and wife are eligible individuals. Husband and wife
are treated as having only family coverage. The combined HSA contribution
by husband and wife cannot exceed $5,650, to be divided between
them by agreement.
Example 3: Husband and wife have family
HDHP coverage with a $5,000 deductible. Husband has no other coverage.
Wife also has family HDHP coverage with a $3,000 deductible. Both
husband and wife are eligible individuals. The maximum combined
HSA contribution by husband and wife is $5,650, to be divided between
them by agreement.
Example 4: Husband and wife have family
HDHP coverage with a $5,000 deductible. Husband has no other coverage.
Wife also has family coverage with a $200 deductible. Husband and
wife are treated as having family coverage with the lowest annual
deductible ($200). Neither husband nor wife is an eligible individual
and neither may contribute to an HSA.
Example 5: Husband and wife have family
HDHP coverage with a $5,000 deductible. Husband has no other coverage.
Wife also is enrolled in Medicare. Wife is not an eligible individual
and cannot contribute to an HSA. Husband may contribute $5,650 to
an HSA
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Does tax filing status (joint vs. separate) affect my contribution?
Tax filing status does not affect your
contribution.
I’m a single parent with HDHP coverage but have child/relative
that can be claimed as a dependent for tax purposes, and this
dependent also has non-HDHP coverage. Am I still eligible for
an HSA?
Yes, you are still eligible for an HSA.
Your dependent’s non-HDHP coverage does not affect your eligibility,
even if they are covered by your HDHP. You can contribute up to
the statutory limit ($5,650) to your HSA.
May a self-employed person contribute to an HSA on a pre-tax
basis?
No. Self-employed persons may not contribute
to an HSA on a pre-tax basis and may not take the amount of their
HSA contribution as a deduction for SECA purposes. However, they
may contribute to an HSA with after-tax dollars and take the above-the-line
deduction.
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