I started a new job in April that offers a high-deductible health insurance policy with a health savings account. Am I able to contribute the full amount for family coverage to the HSA for 2014, or do I need to prorate the contribution for the months that I’ve had the policy?
The HSA contribution rules are tricky, but they help in your situation: As long as you have an HSA-eligible health insurance policy on December 1, 2014 (with a deductible of at least $2,500 for family coverage, or $1,250 for an individual), you can make the full contribution for the year. In your case, that’s $6,550 for family coverage (it would be $3,300 if you had individual coverage), plus $1,000 if you’re 55 or older anytime during the year.
If you make the full contribution, however, there is one big caveat: You must keep an HSA-eligible policy for the entire following calendar year. If you don’t keep the HSA-eligible policy for all of 2015, then you’ll have to pay income tax and a 10% penalty on the difference between the amount you contributed ($6,550) and the amount you would have been eligible to contribute based on the number of months you had an HSA-eligible policy ($4,912.50 for the nine months from April through December), says Todd Berkley, president of HSA Consulting Services. “IRS Form 8889 will walk you through the calculation,” he says.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
This rule is important to keep in mind when choosing your health plan for 2015 during open-enrollment season, which starts November 15. However, a lot of people choose to prorate their contributions rather than maxing them out so they don't need to worry about keeping coverage for the following year, Berkley says.
-
Why You Should Consider Private Equity in Your Investment PortfolioPrivate equity investment is a way to broaden your exposure beyond the mega-cap, tech-heavy giants and reach into the broader economic landscape.
-
What You Need to Know About Taxes in a Gray DivorceIf you're not careful about how assets are divided or sold, you could get hit with a big tax bill.
-
Credit Report Error? They All Mattercredit & debt Don't dismiss a minor error. It could be the sign of something more serious.
-
Insurance for a Learning Driverinsurance Adding a teen driver to your plan will raise premiums, but there are things you can do to help reduce them.
-
529 Plans Aren’t Just for Kids529 Plans You don’t have to be college-age to use the money tax-free, but there are stipulations.
-
When to Transfer Ownership of a Custodial Accountsavings Before your child turns 18, you should check with your broker about the account's age of majority and termination.
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
-
When It Pays to Buy Travel Insurance
Travel Investing in travel insurance can help recover some costs when your vacation gets ruined by a natural disaster, medical emergency or other catastrophe.
-
What Travel Insurance Covers When Planes Are Grounded
Travel Your travel insurance might help with some costs if your trip was delayed because of the recent grounding of Boeing 737 Max planes.
-
Ways to Spend Your Flexible Spending Account Money by March 15 Deadline
spending Many workers will be hitting the drugstore in the next few days to use up leftover flexible spending account money from 2018 so they don’t lose it.
