HSA Contribution & Tax Savings Planner

A Health Savings Account (HSA) is a tax-advantaged savings account that you can use to pay for qualified medical expenses. HSAs are available to people who are enrolled in a high-deductible health plan (HDHP) and meet other eligibility requirements.

Eligibility

To be eligible for an HSA, you generally must:

• Be enrolled in a high-deductible health plan (HDHP)
• Not be enrolled in Medicare
• Not be claimed as a dependent on someone else's tax return
• Not have other disqualifying health coverage (such as a general purpose FSA)

Contributions

You, your employer, or both can contribute to your HSA. Contributions are subject to annual limits set by the IRS, which vary based on your coverage type (self-only or family) and age. People age 55 and older may be eligible for additional "catch-up" contributions.

Tax Advantages

HSAs offer three main tax advantages:

• Pre-tax contributions: Contributions made through payroll deductions are typically pre-tax, reducing your taxable income.
• Tax-free growth: Money in your HSA can grow through investments, and any earnings are not taxed.
• Tax-free withdrawals: Withdrawals used for qualified medical expenses are tax-free.

HSA contribution limits are set annually by the IRS and vary based on your coverage type and age. These limits apply to the combined total of your contributions and your employer's contributions.

Annual Limits

• Self-only coverage: Lower limit (varies by year, typically around $4,000-$4,500)
• Family coverage: Higher limit (varies by year, typically around $8,000-$9,000)

Catch-Up Contributions

If you are age 55 or older by the end of the tax year, you may be eligible for an additional catch-up contribution (typically $1,000 per year). This is in addition to the regular annual limit.

Partial Year Eligibility

If you are not eligible for an HSA for the entire year, your contribution limit may be prorated based on the number of months you were eligible. However, there are special rules for this, and you should confirm with a tax professional.

Contributing more than the annual HSA limit can result in tax penalties and complications. It's important to stay within the limits to avoid these issues.

Tax Consequences

Excess HSA contributions may be subject to:

• Income tax on the excess amount
• An excise tax penalty (typically 6% per year) on the excess until it's corrected
• Additional complications if not corrected in a timely manner

Why People Talk to Professionals

HSA contribution limits, eligibility rules, and tax consequences can be complex. Many people consult with:

• HSA providers: To understand contribution limits, track contributions, and handle excess contributions
• Tax professionals: To understand tax implications, correct excess contributions, and ensure compliance
• Employer benefits administrators: To understand employer contribution policies and coordinate with payroll

This calculator provides simplified estimates based on the information you enter. It uses fixed HSA limits and marginal tax rates to show approximate tax savings and contribution scenarios.