Contributing to an HSA is easy enough for those whose with an employer that offers an HDHP plan – just select your payroll deduction and your employer takes care of the rest. But, what if you don’t have a health plan through an employer? Can you contribute to an HSA outside of an employer plan if you are self-employed or your employer doesn’t offer health insurance? And can you still deduct your HSA contributions?
I was confronted with that question by a reader, Melissa, in a post comment a while back:
Does anyone have any information or advice on an individual contributing to an HSA that is not tied to an employer? My employer does not offer benefits or a sponsored HSA. I opened up an HSA this year, but am unsure if I can still contribute to this tax-free (via payroll deduction) if the plan is not “employer sponsored.” I know that I can contribute from my checking/savings account, but I feel that this defeats the purpose.
That’s a great question. Before I answer, let me first say that HSAs offer outstanding tax benefits and are a great option for everyone to save money on health care costs (and they can even be used like an IRA for non-medical expenses at retirement age). If you don’t have one, you should consider a plan that will allow you to do so. Let’s dig in further…
Can you Contribute to an HSA Outside of an Employer Plan?
Yes. If you are self-employed or your employer does not offer a health plan, you can contribute to an HSA. However, typical HSA eligibility rules still apply. You must have HDHP coverage in order to contribute to an HSA and meet the following eligibility requirements:
- You must be covered under a HDHP, on the first day of the month.
- You have no other health insurance coverage (excluding vision, dental, disability, accident, long-term care) and are not covered by another plan (e.g. spouses employer plan).
- You are not enrolled in Medicare.
- You cannot be claimed as a dependent on someone else’s tax return.
HSA-eligible HDHP plans will typically clearly state that they are “HSA eligible”.
Healthcare.gov Plan HSA Contributions
Since you are buying your health insurance separate from your employer, you will likely be buying it on a state public exchange or on healthcare.gov (if your state does not have its own exchange).
If you want to contribute to an HSA, you’ll have to find a health plan that is HDHP-compliant (see my HDHP article for more info). To find an HDHP that is eligible for HSA contributions when shopping for plans on healthcare.gov, select:
Then, you will see the option to choose HSA-eligible plans:
Most HSA eligible plans are at the “bronze” level, but a few “silver” level plans are HSA eligible as well.
Can you Set up Payroll Deductions for a non-employer HDHP?
It is possible, but highly unlikely that your employer has a partnership with an HSA-provider to execute HSA payroll deductions if they do not offer a health plan. So the answer to this question is almost always “no”.
Are HSA Contributions Outside of an Employer Tax Deductible?
Contributing to an HSA outside of payroll does not defeat the purpose – non-payroll HSA contributions are still tax deductible. In other words, the same tax benefits apply (outside of FICA), it’s just that they won’t be 100% realized until you complete your tax return.
If you do contribute to an HSA on your own, it may be wise to adjust your tax withholding on Form W-4 with your employer downward, so that less taxes are withheld over the course of the year and you don’t end up with an inflated refund.
How to Deduct HSA Contributions
To deduct HSA contributions from your taxable income, report contributions on Form 8889 (if you use tax software, there should be a section on this) and file it with your Form 1040 return.
Note that you do not have to itemize your tax deductions in order to deduct your HSA contributions – you can deduct and claim the standard deduction. HSA contributions are considered as an “above the line” deduction, meaning that the deduction for HSA contributions is used in determining adjusted gross income.
For more on HSA contributions and their tax implications, check out the HSA section of IRS publication 969.
When can you Make HSA Contributions?
The HSA contribution deadline is the same date as the tax deadline (typically April 15th of the year following the tax year you are contributing for). Contributions don’t have to be equally distributed – you can do it all in one lump sum. In this regard, HSAs are identical to IRAs.
How Much can I Contribute to an HSA if I Didn’t have an HDHP Until Later in the Year?
Here’s a little-known HSA fact: under the “last-month rule”, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year. You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month and can contribute up to the full maximum HSA contribution.
Can you Front-Load HSA Contributions?
You can front-load your HSA contributions, but you may not want to unless you are confident you will have your HDHP for the entire year, otherwise, it can create a bit of a mess having to claw back your contributions to avoid taxes and penalty.
How much can you Contribute to an HSA that is Not Tied to an Employer?
The normal maximum HSA contribution rules still apply (and vary based on your tax filing status).
Where to Get a Non-Employer HSA:
One nice benefit of having an HSA that is not associated with your employer is that you get to choose the HSA administrator versus being captive to your employer’s (some of them are really bad). Here’s a list of the best HSA accounts that I have found. Even if you have an HSA through an employer, you can create another HSA at any time and transfer funds between any 2 HSAs at any time (even from your employer-sponsored HSA to your own). Most employer HSAs are not great – so I’d recommend it.
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Super helpful post. An HSA has such enormous benefits! I work in employee benefits and I’m continually surprised about all the benefits of having an HSA.
HSA’s are like a Roth IRA on steroids.
The major benefit to doing payroll deductions is that it is also FICA tax free whereas outside of employer payroll deductions you only get to deduct your contributions against your income tax.
The one question I have about this article is that you mention in order to be eligible for an HSA I cannot be covered by any othet insurance beyond the HDHP. That does not seem right because Ive had dental and basic short term disability insurance for two years through my employer and could get STD /LTD and vision if I wanted. Is that restriction only for HSA eligible plans purchased outside of one’s employer?
Any other non-HDHP health insurance, to specify.
Thanks so much for a detailed and super informative post. I have question regarding my personal situation. We have a family health insurance via my employer and it is a High Deductible plan. However the employer cannot offer a HSA plan. Can we still open an HSA account with an online bank on our own for me and my wife?
“The same tax benefits apply” is not entirely correct when comparing a payroll deduction to a normal contribution. As Tim noted above, you are still subject to FICA taxes if you make your own contributions. Having HSA contributions deducted from your paycheck results in them being exempt from FICA taxes.
I am 63, retired and want to continue contributing to the HSA I have, but the new Marketplace Plan I am in is not HSA qualified. In fact there are ZERO plans in Missouri that are HSA qualified. So my HSA I opened last year (thru a credit union) told me I am unable to contribute this year. I can spend my balance but not add to it.
Do you have any thoughts as to how to work around that?
I currently have a plan that only covers preventative care and had an HSA/HDHP at a previous employer. Can I still make post-tax contributions to my HSA?
Thanks
I have a high deductible insurance and my employer offers a HSA , my husband company has a high educable insurance but his company doesn’t offer an HSA can I just put in the amount allowed for a family in to my HSA account? rather than opening two accounts, because we have two different insurances?
I have an HSA account but my new employer doesn’t contribute, and I didn’t put any money into it this year. Can I literally put money into the HSA from savings and take it right back out to reimburse myself for this year’s healthcare related expenses?
Yes! There’s a new provider that makes the tracking of that super easy and automated. http://www.bendhsa.com. They even find the eligible expenses for you, and you can then “run the money through” the HSA to get the tax break.
My husband and I have a HDHP insurance plan through the marketplace (Husband is self-employed). I work for an employer who does not offer a group plan but is willing to help offset some of the expense of the Health Insurance we have – can my employer cut me a check for my HSA (not fund it directly to the HSA account) and get his business deduction? I understand it would go on my W2 (as a memo item) and there would be no pre-tax issue.
What if your employer does not offer HSA, but offers a High Deductible health plan. Can you take that offer (choose that health plan) and contribute to HSA independently (though an HSA account you set up yourself)? Or do you have to buy an insurance *outside* of your employer’s offering? Thanks.
I have an HDHP through my employer but they say the plan does not allow them/me to make pre-tax contributions to my HSA (an account I acquired on my own, outside of the company). Why not??