Knowing when to max out health savings account and when to prorate

July 6, 2014 

Q. I started a new job in April that offers a high-deductible health insurance policy with a health savings account. Am I able to contribute the full amount for family coverage to the HSA for 2014, or do I need to prorate the contribution for the months that I’ve had the policy?

A. The HSA contribution rules are tricky, but they help in your situation: As long as you have an HSA-eligible health insurance policy on Dec. 1, 2014 (with a deductible of at least $2,500 for family coverage or $1,250 for an individual), you can make the full contribution for the year. In your case, that’s $6,550 for family coverage (it would be $3,300 if you had individual coverage), plus $1,000 if you’re 55 or older anytime during the year.

If you make the full contribution, however, there is one big caveat: You must keep an HSA-eligible policy for the entire following calendar year. If you don’t keep the HSA-eligible policy for all of 2015, then you’ll have to pay income tax and a 10 percent penalty on the difference between the amount you contributed ($6,550) and the amount you would have been eligible to contribute based on the number of months you had an HSA-eligible policy ($4,912.50 for the nine months from April through December), says Todd Berkley, president of HSA Consulting Services. “IRS Form 8889 will walk you through the calculation,” he says.

This rule is important to keep in mind when choosing your health plan for 2015 during open-enrollment season, which starts Nov. 15. However, a lot of people choose to prorate their contributions rather than maxing them out so they don’t need to worry about keeping coverage for the following year, Berkley says.

Kimberly Lankford is a contributing editor to Kiplinger’s Personal Finance magazine. Send your questions and comments to And for more on this and similar money topics, visit

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