I’ll be writing a couple of checks out in the next few weeks to my credit union. This will bring our HSA contributions for last year and this year up to the maximum limits for each year. The process is pretty painless (good people at that credit union), and I know I’ll leave with a good feeling about how much I’ll be saving in taxes.
If you’ll remember, I opened our HSA (health savings account) with a local credit union a few years ago. I did this since I’d become self-employed and become eligible for an HSA because my high deductible health insurance plan was compatible.
Now, each year before I file my taxes, I make sure my HSAs have been maxed out for the previous tax year. That’s right, you have until April 15th or when you file your taxes (which ever comes first) to make a contribution to you HSA for the previous tax year.
Before I move on to the HSA contribution limits, I think I better explain how they work. A Health Savings Account is a tax-advantaged savings account for health care expenses. From a tax perspective, it acts very similar to a Roth IRA, except you get to use the money in the account now (vs in retirement) for qualifying health care expenses.
The money you place into the HSA can be deducted from your income (line 25 of your Form 1040). The money can also be invested, and any growth you experience will not be taxed. You can see why this is a popular savings tool.
HSA Contribution Limits
- For 2014, the HSA contribution limits were upped to $3,300 for individuals and $6,550 for families. The catch-up limit is still at an additional $1,000.
- For 2013, the HSA contribution limits were upped to $3,250 for individuals and $6,450 for families. The catch-up limit is still at an additional $1,000.
- For 2012, the HSA contribution limits were raised to $3,100 for individuals and $6,250 for families. Don’t forget, in each year there is a “catch-up” limit. Therefore if you happen to be 55 or older you can contribute an additional $1000 to your HSA. Lucky you.
- For tax year 2011, the annual HSA contributions limit remained the same as they were the previous year: $3,050 for individuals and $6,150 for families that own an HSA. If more than one person is on your health insurance plan, then it’s a family plan.
Here’s a pretty chart to quickly check the limits.
- What if I wasn’t on the HSA eligible plan all year? As long as you are eligible for at least the last month of the year (by December 1), and you keep the eligible plan throughout the next year, you can still contribute the maximum. See IRS Pub 969 for more.
- What if my employer manages my plan? If you are HSA eligible, but your employer manages everything, check with human resources to see how much was contributed on your behalf last year. You can make additional contributions directly to bring your contributions up to the maximums.
Lastly, remember that contributions to an HSA, unlike those contributed to a Flexible Spending Account, can be rolled over to subsequent years. There is no use-it-or-lose-it rule.
Have you contributed to your HSA for last year yet? How quickly do you make this year’s contribution?