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August 10, 2008
Health Savings Account Contribution Question
I have a Health Savings Account that was opened when my employer switched to a high-deductible policy. My pre-tax deductions were deposited in the Health Savings Account from my paycheck. I have moved to another employer that does not offer a high-deductible policy. Can I still contribute to the Health Savings Account? If so, are the contributions tax-deductible? Can I still pay health-related costs from the Health Savings Account?
You can only make Health Savings Account contributions for the months that you were covered under an HSA-qualified high-deductible health insurance plan. But...
if you didn't make the maximum contributions that were allowed when you were eligible, then you may still be able to contribute the remainder of the money.
For example, if you had HSA-qualified health insurance plan from January 1 to April 31, 2008, then you were eligible to make four months' worth of contributions. The maximum contribution limit for 2008 is $2,900 for people who are not yet age 55 with individual coverage. So you could contribute $966.67 (4/12 of $2,900). If you only had $200 taken out of your paycheck every month for the Health Savings Account ($800 total), then you can still contribute $166.67 to your Health Savings Account for 2008.
Because your contributions are no longer subtracted from your pay before taxes, you'll need to deduct those extra contributions when you file your 2008 income tax return (the last day for making 2008 contributions will be April 15, 2009).
Good news on the second half of your question: You can always use money from an existing Health Savings Account tax-free to pay out-of-pocket medical expenses in any year, even if you can't make new contributions, as long as the expenses were incurred after you opened the Health Savings Account.
You can learn more about Health Savings Accounts at: http://www.health--savings--accounts.com
Posted by Wiley Long at August 10, 2008 03:22 PM