Can I Make a One-Time Contribution to My HSA?

Health Savings Accounts (HSAs) offer a tax-advantaged way to save for healthcare expenses. These accounts are designed to work in conjunction with high-deductible health plans (HDHPs). Individuals can make one-time contributions to their HSA, subject to certain conditions and annual limits.

Eligibility and Contribution Amounts

To contribute to an HSA, an individual must be covered by a high-deductible health plan (HDHP). For 2025, an HDHP must have a minimum annual deductible of at least $1,650 for self-only coverage or $3,300 for family coverage. Additionally, the plan’s annual out-of-pocket maximums, which include deductibles, co-payments, and co-insurance, cannot exceed $8,300 for self-only coverage or $16,600 for family coverage. These limits apply to in-network services, and premiums are not included in the out-of-pocket maximum.

Beyond HDHP enrollment, other eligibility criteria include not being covered by any other health plan that is not an HDHP, with limited exceptions for vision or dental benefits. An individual must also not be enrolled in Medicare, nor can they be claimed as a dependent on someone else’s tax return. Eligibility to contribute to an HSA can change throughout the year, impacting the maximum amount an individual can contribute. If an individual is eligible for only part of the year, their contribution limit is typically prorated based on the number of months they were eligible. However, a special “last-month rule” allows an individual who is eligible on the first day of the last month of their tax year (December 1st) to contribute the full annual amount, provided they remain an eligible individual for the entire following year.

The Internal Revenue Service (IRS) sets annual contribution limits for HSAs. For 2025, the maximum contribution for individuals with self-only HDHP coverage is $4,300. Those with family HDHP coverage can contribute up to $8,550. Individuals aged 55 and older are permitted to make an additional “catch-up” contribution of $1,000 annually. This means an individual aged 55 or older with self-only coverage could contribute a total of $5,300, and those with family coverage could contribute $9,550. It is important to remember that any contributions made by an employer also count towards these annual limits. If both spouses are 55 or older and covered by a family HDHP, each can make a $1,000 catch-up contribution, but these must be made to separate HSA accounts.

Ways to Fund Your HSA

While many employers facilitate contributions through payroll deductions, direct contributions from an individual’s personal bank account are also a common and straightforward option. These direct contributions are made with after-tax dollars, meaning the funds are transferred from a checking or savings account to the HSA custodian after taxes have been withheld from the individual’s income. However, these amounts are later deducted when filing taxes, effectively making them tax-deductible.

Common methods for making direct one-time contributions include electronic transfers, such as Automated Clearing House (ACH) transactions, which move funds directly between bank accounts. Some HSA custodians may also accept personal checks or wire transfers for larger, less frequent contributions. The specific options available depend on the HSA provider.

A unique way to make a one-time contribution is through a Qualified HSA Funding Distribution (QHFD) from an Individual Retirement Arrangement (IRA). This allows individuals to transfer funds directly from a traditional or Roth IRA to their HSA without the transfer being considered a taxable IRA distribution. Certain rules govern this type of transfer: generally, only one QHFD is permitted per lifetime, although a second one may be allowed if 12 months have passed since the previous QHFD. The amount transferred cannot exceed the annual HSA contribution limit for the year, and the individual must remain HSA-eligible for a continuous 12-month period following the transfer. Failure to maintain eligibility can result in the transferred amount being included in taxable income and potentially subject to a 10% penalty.

Contributions for a given tax year can be made up to the tax filing deadline for that year, typically April 15th of the following calendar year. This extended deadline provides individuals with additional time to fund their HSA for the prior year, allowing them to assess their financial situation and optimize their contributions, whether through regular payments or a single, larger contribution. This flexibility ensures that individuals can maximize their tax advantages even after the calendar year has ended.

Tax Benefits and Reporting

Health Savings Accounts provide significant tax advantages, often referred to as a “triple tax advantage.” First, contributions made by an individual are tax-deductible, reducing their taxable income for the year, even if they do not itemize deductions on their tax return. Second, any investment earnings within the HSA grow on a tax-free basis, meaning dividends, interest, or capital gains are not taxed as long as they remain in the account. Third, qualified withdrawals for eligible medical expenses are tax-free. This means that funds used to pay for deductibles, co-payments, prescriptions, vision care, and dental care, among other expenses, are not subject to income tax.

However, withdrawals from an HSA that are not used for qualified medical expenses are subject to income tax and may incur an additional 20% penalty if the account holder is under the age of 65. After age 65, non-qualified withdrawals are taxed as ordinary income but are not subject to the penalty.

When it comes to reporting HSA activity to the IRS, two primary forms are involved. The HSA custodian, the financial institution holding the HSA, is responsible for sending Form 5498-SA, “HSA, Archer MSA, or Medicare Advantage MSA Information,” to both the account holder and the IRS. This form reports the total contributions made to the HSA for the year.

Individuals are responsible for filing Form 8889, “Health Savings Accounts (HSAs),” with their federal income tax return. This form is essential for reporting all HSA contributions made during the year, including those made by an employer or through direct payments. It also details any distributions taken from the HSA and is used to calculate the amount of the HSA deduction that can be claimed on the tax return.