The HSA Contribution Deadline
As a follow-up to my IRA contribution deadline post, I wanted to make sure that everyone also knows that the HSA contribution deadline for a calendar year is also at the tax deadline.
Until recently, I assumed that because my employer made payroll deductions for my HSA only through the end of the year, that the deadline for all HSA contributions was the end of the calendar year. That’s not the case. Contrary to popular belief, you can contribute to an HSA outside of an employer’s payroll deductions, and you can do it beyond the calendar year, up until the tax deadline.
Beyond providing additional time to save and contribute funds, this extended HSA deadline gives you even more opportunity to reduce your tax obligation at the last minute, while completing your tax return.
The fact that you have the option of contributing to both an IRA and/or HSA right up until the tax deadline is great, but it provides some interesting scenarios that get a bit complex.
Should you Make an HSA Contribution or an IRA Contribution?
HSA contributions, like Traditional IRA contributions, are tax deductible, so long as you meet the HDHP requirements.
If you can afford to make the maximum HSA contribution and the maximum IRA contribution for a given year, then go for it! If not, you’re left with a choice: HSA contribution versus IRA contribution.
If you’re not eligible for an HSA through a qualified health plan, that makes your choice simple – contribute to an IRA.
If you’re not eligible for a deductible Traditional IRA contribution, due to IRA income limits for those with an employer-sponsored plan (such as a 401K) in the household – contribute to an HSA.
If you’re eligible for both, then what?
HSA and Traditional IRA contributions are both “above the line”, which means that you can claim a tax deduction for them even if you do not itemize your taxes and you take the standard deduction instead. Contributions to either will reduce your adjusted gross income on a dollar-per-dollar basis. So, this criteria is a wash.
All else being equal, HSAs are superior to IRAs because withdrawals for qualified medical expenses are tax-free (similar to Roth IRA withdrawals). Tax deduction and tax free withdrawals – you can’t beat that. This is why HSAs are my favorite type of retirement account.
HSA contributions, however, are not eligible for the Saver’s Credit because they aren’t officially recognized by the IRS as a retirement account, like a 401K or IRA is (even though you can withdraw HSA funds for anything starting at age 65). The Saver’s Credit is a government funded tax credit that matches a percentage of your retirement contribution, up to 50%.
So you’re left with a choice if you haven’t made Saver’s Credit eligible contributions already: tax-free withdrawals for qualified medical expenses (with HSA contributions) versus getting the Saver’s Credit (with IRA contributions).
Here are the tables for the IRA contributions:
2019 Saver’s Credit Amount
| Credit Rate: | Married Filing Jointly: | Head of Household: | All Other Filers: |
|---|---|---|---|
| 50% of your contribution | AGI less than $38,500 | AGI less than $28,875 | AGI less than $19,250 |
| 20% of your contribution | $38,501 - $41,500 | $28,876 - $31,125 | $19,251 - $20,750 |
| 10% of your contribution | $41,501 - $64,000 | $31,126 - $48,000 | $20,751 - $32,000 |
| 0% of your contribution | AGI greater than $64,000 | AGI greater than $48,000 | AGI greater than $32,000 |
2020 Saver’s Credit Amount
| Credit Rate: | Married Filing Jointly: | Head of Household: | All Other Filers: |
|---|---|---|---|
| 50% of your contribution | AGI less than $39,000 | AGI less than $29,250 | AGI less than $19,500 |
| 20% of your contribution | $39,001 - $42,500 | $29,251 - $31,875 | $19,501 - $21,250 |
| 10% of your contribution | $42,501 - $65,000 | $31,875 - $48,750 | $21,251 - $32,500 |
| 0% of your contribution | AGI greater than $65,000 | AGI greater than $48,750 | AGI greater than $32,500 |
As a general rule, if you are eligible for a 20% or 50% Saver’s Tax Credit, choosing to contribute to the IRA over the HSA is probably the better move because your tax credit rate on your IRA contribution will be higher than your tax rate.
If you are eligible for a 10% Saver’s Tax Credit (or no credit at all), choosing to contribute to the HSA over the IRA is probably the better move because your tax credit rate on an IRA contribution would be lower than your tax rate.
How to Make an HSA Contribution Before the Deadline for the Previous Year
To make an HSA contribution for the previous year, you simply choose which year you would like to apply the contribution to within your HSA account.
If you didn’t know that all of this was a thing, don’t feel bad, you’re not alone. Only 21.8 million Americans have an HSA, and far fewer know that you can contribute to an IRA outside of payroll.
For more information, refer to the links in this article or IRS publication 969.
Have a last-minute tax-saving HSA contribution success story? Please share in the comments!
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In my example I cannot add to IRA. DW maxes out her traditional IRA. I max out my 401k. If I top off our family HSA (~ 2k short) I can amend my tax return from last year and get some money back from the IRS while at the same time paying for some outstanding medical bills?
Potentially – but confirm w/ appropriate parties (HSA admin, IRS, tax preparer).
This is a helpful article, especially with determining whether we should contribute to an HSA or IRA depending on our AGI. Question…do you know if I open an HSA this month (Jan. 2019), can I still do a prior year contribution for last year? We have been on an HDHP most of 2018 but just haven’t opened an HSA yet.
Christie, you have until April 15, 2019 to open and contribute to an HSA for 2018. You will need to complete an IRS worksheet to determine the maximum amount if health coverage changed anytime in 2018.
Okay, so I/we can add catch-up funds to my wife’s HSA for 2018 up until April 15, or whenever we file federal income tax this year. Problem: my wife does not currently have an existing HSA. i have been told that I cannot open an HSA now (2019) and make her catch-up contribution of $1000 for 2018. I have scoured Pub 969 and cannot find anywhere it says that we can’t. I believe this person at BenefitWallet is incorrect. Do you know of any such rule that disallows opening an HSA in 2019, then making a legitimate contribution for 2018? Thanks in advance.
Can I use funds to reimburse myself for medical expense incurred in Feb of 2018 if I open an Hsa account after that date?
No, and there would be no value (and added tax paperwork) in putting money in and taking it back out. Deposit money in your HSA to save for future medical expenses.
I don’t believe your answer. Say I get $120 income and I put it in the bank less taxes, let’s say I put in $100 ($20 to the gov’t). If I pay a $100 doctor bill with that I have nothing left. If I take $120 and put it in the HSA I have no taxable income. I pay the $100 doctor bill and have $20 left (which is 16% of my money). My recommendation to Maureen is to ask a professional and not some random blog.
Thomas, if you have a high deductible medical insurance plan which covers an individual or family, then you should be eligible to open an HSA. So if you do have an HSA, you are correct that you would have $20 left ($120 – $100 Dr. bill) in your HSA to spend on future medical expenses. That is the benefit of having a high deductible insurance plan with an HSA!! Your contributions, whether payroll deduction or self-contributed are pre-tax, the earnings are not taxable (on balances that are invested), and when you use the money for qualified medical expenses, you do not pay taxes on the amount that is spent!! Check into it, and this is not a random blog!
How would it work if i have already filed my 2018 taxes and now want to contribute to my 2018 HSA. this is new to me and i noticed i did not hit my contribution limit for 2018. Do i have to file an amendment? or can i handle it as a deduction when i do my 2019 tax returns?
This is such a helpful article! I have had an HSA account and high deductible health insurance plans for several years now. My question is with respect to the deadline for seeking reimbursement in 2019 for medical expenses incurred in 2018. I neglected to reimburse myself for a $600 medical bill that I paid directly to the provider with a check in Nov/Dec 2018. I have an extension for filing my 2018 tax returns (business and personal) and will do so in August. Is it too late?? Someone told me the deadline was March 31. I wanted to make sure. Thank you!