Are HSA Contributions Prorated? A Look at the Rules
Determine your correct HSA contribution limit with partial-year health plan coverage. Explore how eligibility timing creates different calculation options and requirements.
A Health Savings Account (HSA) is a tax-advantaged savings account for healthcare expenses, available to those enrolled in a high-deductible health plan (HDHP). The Internal Revenue Service (IRS) establishes annual contribution limits. For 2025, individuals with self-only HDHP coverage can contribute up to $4,300, while those with family coverage can contribute up to $8,550. These limits are important when your eligibility doesn’t span the entire calendar year.
The General Rule for HSA Contributions
The standard approach for determining your HSA contribution limit is based on a monthly proration. Your maximum allowable contribution is calculated based on the number of months you are an “eligible individual.” To be eligible for a given month, you must meet several criteria on the first day of that month:
- Be covered by a qualifying HDHP
- Have no other health coverage that would disqualify you
- Not be enrolled in Medicare
- Not be claimable as a dependent on someone else’s tax return
This rule means if your HDHP coverage begins mid-year, your contribution limit is proportionally reduced. For instance, if an individual with self-only coverage becomes eligible on September 1, they are eligible for four months of the year. Their maximum contribution would be 4/12ths of the annual limit, which for 2025 would be (4/12) $4,300, or approximately $1,433.
The Last-Month Rule Exception
An exception to the proration method is the “last-month rule,” as detailed in IRS Publication 969. This provision allows an individual to make the full, non-prorated HSA contribution for the year, provided they are an eligible individual on the first day of the last month of their tax year. For most taxpayers, this date is December 1. If you meet the eligibility requirements on this day, you can contribute up to the maximum annual limit, regardless of how many prior months you were covered.
This rule offers an advantage for those who become eligible late in the year. For example, someone who enrolls in an HDHP on December 1 could contribute the entire annual limit rather than just one month’s prorated share. The choice to use the last-month rule is optional, giving taxpayers flexibility to decide between a smaller prorated contribution or the full annual amount based on their financial situation.
The Testing Period Requirement
Opting to use the last-month rule to make a full-year contribution comes with a condition known as the “testing period.” This IRS requirement mandates that you must remain an eligible individual throughout the entire following calendar year. The testing period begins on the first day of the last month of the contribution year and ends on the last day of the following year.
Failing to remain eligible during this 13-month window, for any reason other than death or disability, triggers financial consequences. The portion of your contribution that exceeded the prorated amount becomes taxable income and must be reported on your tax return for the year you fail the test. This same amount is also subject to an additional 10% penalty tax.
Calculating Your Allowable Contribution
To calculate your prorated contribution, divide the annual limit by 12 and multiply by the number of eligible months. For example, someone with family coverage eligible for the last five months of 2025 would have a limit of ($8,550 / 12) 5, or $3,562.50. If that same person used the last-month rule, they could contribute the full $8,550 but would be subject to the testing period.
Changes in coverage also affect the calculation. If you switch from self-only to family coverage on June 1, your limit is the sum of the monthly limits for each coverage type. For 2025, this would be (5/12 $4,300) + (7/12 $8,550), for a total of approximately $6,781.
Individuals aged 55 or older can make an additional “catch-up” contribution of $1,000. This amount is also subject to proration under the general rule. If an individual is eligible for only six months, they can contribute an additional $500. However, if they use the last-month rule, they can contribute the full $1,000 catch-up amount, provided they also remain eligible through the subsequent testing period.