When Do HSA Contributions Have to Be Made?

A Health Savings Account (HSA) offers a tax-advantaged way to save for eligible healthcare expenses. These accounts provide a unique combination of tax benefits, including tax-deductible contributions, tax-free growth through investments, and tax-free withdrawals for qualified medical costs. Understanding the specific rules and deadlines for contributing to an HSA is important for maximizing its benefits and avoiding potential penalties.

Understanding HSA Contribution Deadlines

The primary deadline for making contributions to your Health Savings Account for a given tax year is the federal income tax filing deadline of the following calendar year. This date typically falls on April 15th. For example, contributions for the 2024 tax year must generally be made by April 15, 2025. If April 15th lands on a weekend or a legal holiday, the deadline automatically shifts to the next business day.

This deadline applies to contributions made by individuals, whether directly or through payroll deductions, as well as contributions made by employers on behalf of their employees. Contributions made by this April deadline are for the previous tax year, allowing individuals to contribute even after the calendar year has ended. To contribute to an HSA, you must be covered by a high-deductible health plan (HDHP) and meet other eligibility requirements, such as not being enrolled in Medicare or being claimed as a dependent on someone else’s tax return.

Designating Contributions for a Specific Tax Year

Contributions made between January 1st and the tax filing deadline (typically April 15th) can be allocated to either the current tax year or the preceding tax year. This flexibility allows individuals to complete their contributions for the prior year even after the new calendar year has begun. Clearly designate to your HSA custodian which tax year a contribution is intended for. This designation is crucial for accurate tax reporting and compliance.

Your HSA custodian is responsible for reporting contributions to the IRS. They typically issue Form 5498-SA, which reports total contributions made to your HSA for a given tax year. This form includes both individual and employer contributions, ensuring amounts reported on your tax return align with custodian records. You do not need to submit Form 5498-SA with your tax return, but it serves as an important record for verifying contributions.

Managing Excess HSA Contributions

An excess HSA contribution occurs when the amount contributed to an account exceeds the annual limit set by the IRS, or when contributions are made by someone who does not meet the eligibility requirements. Excess contributions are not tax-deductible and can lead to financial penalties.

The Internal Revenue Service imposes a 6% excise tax on any excess contribution, which applies for each year the excess amount remains in the account. This tax is reported on IRS Form 5329. To avoid this excise tax, remove excess contributions and any net income earned on them by the tax filing deadline for the year the excess occurred, including extensions. The net income must also be withdrawn and reported as “other income” on your tax return.

If you discover an excess contribution after the tax filing deadline, the 6% excise tax for the year the excess occurred will still apply. However, you can prevent future excise taxes by either withdrawing the excess amount or by applying it towards the following year’s contribution limit. Consult a tax professional for complex situations involving excess contributions, especially if they have remained in the account for multiple years, to ensure proper correction and minimize tax implications.