Contributing to a Health Savings Account

Can I still make contributions to my health savings account for 2012? I’m wondering if the deadline is April 15, 2013, like it is for IRAs, or if I had to make the contributions by December 31?

It’s not too late to contribute to a health savings account for 2012. You have until April 15, 2013, to contribute up to $3,100 for 2012 if you have individual health insurance coverage, or up to $6,250 if you have family coverage. You can contribute an extra $1,000 for the year if you’re 55 or older.

To qualify to make HSA contributions, your health insurance policy must have had a deductible of at least $1,200 for individual coverage or $2,400 for family coverage in 2012 (the numbers are all slightly higher for 2013). Also, you can’t contribute to an HSA after you sign up for Medicare, but you can still use money from the account tax-free for eligible medical expenses at any age. (See How to Make HSA Contributions After Age 65 for more information about the rules for forgoing signing up for Medicare in order to continue making HSA contributions.)

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It’s easiest to make the extra contributions if you buy health insurance on your own. In that case, you’d just add money to the account and deduct the contributions for 2012 when you file your taxes – like you would with a tax-deductible IRA. It can be a bit trickier if you have employer coverage and usually make pretax HSA contributions from your paycheck. Employers generally don’t permit payroll-deducted contributions after year-end, says Will Applegate, vice-president of Fidelity Investments, which administers many employers’ HSAs. But employees who want to contribute after December 31 can do so on an after-tax basis (similar to making a bank deposit) and can take a tax deduction for that portion of their contribution when they file their taxes, he says. Contact your HSA administrator for its specific procedure. "It will be much like how you would make a deposit to a bank account, which could be online or by mailing a check with a deposit slip," says Applegate.

Contributing to an HSA gives you a triple tax break. Your contributions are pretax (or tax-deductible), the money grows tax-deferred, and it can be used tax-free for out-of-pocket medical expenses in any year. You can use the money to pay your health insurance deductible, co-payments for medical care and prescription drugs, or bills not covered by insurance, such as vision and dental care.

You don’t have to use the money by the end of the year. You can keep it in the account growing tax-deferred for future expenses, and you can even use it to reimburse yourself for the money that Social Security withholds from your benefits to pay for Medicare Part B. You can also use HSA funds for Medicare Part D and Medicare Advantage (but not medigap) premiums, or for a portion of your long-term-care insurance premiums. If you use HSA money for nonmedical expenses, you’ll have to pay taxes on it (plus a 20% penalty before age 65).