Can I Make A Deductible Contribution To My HSA? (2023 updated)

An HSA, or Health Savings Account, is a personal savings account that allows you to save money for medical expenses while potentially reducing your taxable income. If you meet the HSA rules and eligibility requirements, including being enrolled in a high-deductible health plan, you can use your HSA contributions to pay for or reimburse yourself for qualified medical expenses. 

This can be a useful tool for individuals who are looking for a way to save for future health care costs while also taking advantage of tax benefits.

The HSA contribution rules are generally straightforward. However, the rules can become complicated when you are making a change to your healthcare coverage. For example, if you are moving from individual to family coverage, leaving your health plan, or starting Medicare it is important to revisit the rules and apply them to your unique situation. So do you know if you can make a deductible contribution to your HSA? Read more to find out. 

What is a Health Savings Account (HSA)?

A Health Savings Account (HSA) is a personal savings account designed to help individuals pay for qualifying medical expenses. HSAs are available to individuals enrolled in a high-deductible health plan (HDHP) and meet specific other requirements.

Contributions to an HSA are tax-deductible, meaning they can be used to reduce your taxable income. This can potentially lower your tax bill and increase your tax refund. In addition, HSAs are portable, which means they stay with you even if you change jobs or insurance plans. The money in your HSA belongs to you and can be used to pay for medical expenses at any time, regardless of whether you are currently enrolled in an HDHP.

HSAs are a good option for individuals looking to save for future medical expenses and are willing to pay for some of their healthcare costs upfront in exchange for the potential tax benefits.

How to make a deductible contribution to my HSA?

You can make deductible contributions to your Health Savings Account (HSA) if enrolled in a high-deductible health plan (HDHP) and meet specific other requirements.

To make a deductible contribution to your HSA, you must be enrolled in an HDHP and not be covered by any other health plan that is not an HDHP, except for certain types of permitted coverage (such as coverage for accidents, disability, or certain diseases). You also cannot be enrolled in Medicare or be claimed as a dependent on someone else’s tax return.

If you meet these requirements and want to make a deductible contribution to your HSA, you can do so through your employer or on your own. You can also ask your employer if they offer a salary reduction arrangement, which allows you to contribute to your HSA through payroll deductions.

It’s important to note that there are limits on the amount of deductible contributions you can make to your HSA each year. These limits are determined by the Internal Revenue Service (IRS) and are based on your HDHP coverage and whether you have self-only or family coverage.

Steps for contributing to a Health Savings Account (HSA)

1. Check your eligibility:

To be eligible to contribute to an HSA, you must be enrolled in a high-deductible health plan (HDHP) and not be covered by any other health plan that is not an HDHP, except for certain types of permitted coverage (such as coverage for accidents, disability, or certain diseases). You also cannot be enrolled in Medicare or be claimed as a dependent on someone else’s tax return.

2. Determine the contribution limit:

The Internal Revenue Service (IRS) limits the amount of deductible contributions you can make to your HSA each year. These limits are based on your HDHP coverage and whether you have self-only or family coverage. You can find the current contribution limits on the IRS website or by speaking with a tax professional.

3. Open an HSA account:

If you don’t already have an HSA account, you will need to open one. You can do this through your employer or on your own by setting up an account with a financial institution that offers HSAs.

4. Make a contribution:

There are several ways you can contribute to your HSA. You can make a one-time contribution or set up automatic contributions through payroll deductions or automatic bank transfers. You can also make contributions online, by mail, or in person at a financial institution.

5. Keep track of your contributions:

It’s essential to keep track of your contributions to your HSA, as you cannot contribute more than the annual limit. You should also keep receipts and documentation of your contributions, as you may need to provide proof of your contributions if you claim a tax deduction. Check the latest HSA contribution limits for 2023 on our blog post, How An HSA Can Help You Accumulate Wealth.

6. Claim a tax deduction:

If you make deductible contributions to your HSA, you may be able to claim a tax deduction on your income tax return. To claim a deduction, you will need to fill out Form 8889 and attach it to your tax return. You should consult with a tax professional or refer to IRS guidelines for more information on how to claim a tax deduction for your HSA contributions.

To help make this analysis more straightforward, we have created the “Can I Make A Deductible Contribution To My HSA?” flowchart.

It addresses some of the most common issues for an investor trying to contribute to an HSA. As always, there are HSA rules and HSA Contribution limits to be aware of before you move forward. Schedule a complimentary 10-minute consultation with one of our wealth managers to receive tailored guidance for you and your family’s financial needs. Our team of fiduciaries is ready to assist you on your financial journey.

This flowchart considers:

• The minimum deductible requirements for HDHP
• The maximum out-of-pocket expense for HDHP
• Contribution amounts
• Impact if HDHP coverage starts or changes this year
• Full Contribution Rule and Last-Month Rules
• HSA and Medicare coordination