Have You Missed the Deadline to Fund Your HSA in 2022? No, You Have Time!

Have You Missed the Deadline to Fund Your HSA in 2022? No, You Have Time!

You missed one funding opportunity. But you still have time to contribute up to the 2022 maximum in your Health Savings Account.

Yes, we're already more than a week into 2023. The 2022 college football season ends tonight. The NFL 2022 post-season start this coming weekend. Yet you still have time to make additional contributions for 2022 to your Health Savings Account.

Contribution Limits

Contributions to a Health Savings Account are tracked on the calendar year, regardless of when your medical plan renews or the date on which you enrolled. It's important to remember that the contribution year is always tied to the tax (calendar year), not your personal situation or your company's benefits year.

For calendar 2022, the contribution limit is $3,650 for self-only coverage and $7,300 for family coverage. Remember that the family limit applies if you cover yourself and at least one other family member, even if only one of you is eligible to fund a Health Savings Account.

Example 1: You and your spouse are both covered on your employer-sponsored plan. Your spouse is also covered by Medicare. You have family coverage, so you can contribute up to $7,300 to your Health Savings Account.

Example 2: You and your spouse are both covered on your company's HSA-qualified plan, but you are enrolled in Medicare as well. If your spouse meets all eligibility requirements, she (or anyone else) can make a tax-deductible deposit of up to $7,300 into her Health Savings Account.

In addition to this statutory limit, which is adjusted annually for inflation (the 2023 figures are $3,850 and $7,750), any HSA-eligible individual who's age 55 or older can make an annual $1,000 catch-up contribution. This figure is not adjusted for inflation.

Time Limits

How late into 2023 can you make a contribution to reduce your 2022 taxable income? To follow our sports illustration above, you can wait until after the Super Bowl (a good thing if you're planning on contributing your gambling winnings or need to regroup financially after licking your betting wounds). You can wait until after opening day of the baseball season. You can even delay this year until after Jackie Robinson Day in major-league baseball - April 15, which commemorates the date in 1947 that the future Hall of Famer broke the modern major-league color line with the Dodgers.

Because the traditional due-date for federal taxes - April 15 - falls on a Saturday this year, and the following Monday is a holiday in the District of Columbia (Emancipation Day) and in Massachusetts and Maine (Patriots Day), the deadline (without extensions) for filing your 2022 personal tax return is April 18. Your deadline for completing your 2022 Health Savings Account funding is April 18, 2023, even if you file your personal income tax return before the deadline. You simply take the deduction on your tax return and fund your account by the filing deadline (which has been extended some years recently).

Methods of Contributing

You can typically fund your Health Savings Account in one of two ways. The more tax-efficient method is through pre-tax payroll deductions, an option available to employees whose companies offer this benefit through a Cafeteria Plan. Your contributions are deducted pre-tax and are free of federal income and payroll taxes and state income taxes (except in California and New Jersey). And you receive the tax benefit immediately.

The alternative is to fund an account with personal (post-tax) funds and then deduct that amount when filing your personal income tax return. This option offers the same federal and state income tax benefits as a Cafeteria Plan. However, there is no opportunity to deduct federal payroll taxes (up to 7.65%). And you don't receive the tax benefit until you file your taxes.

When you wait until early in the following calendar year to complete your Health Savings Account contributions for the prior year, your only funding option is tax-deductible personal deposits. The Cafeteria Plan option closes at the end of the calendar year.

Still, although you pose the payroll-tax deduction, you may determine as you work through your 2022 tax return that it makes sense financially to reduce your 2022 taxable income. And if you receive an annual bonus, commission, or profit-sharing payment during the first quarter of 2023, you may have the funds to reduce your 2022 taxes owed or increase your refund. Your federal marginal tax rate is probably 22% or 24%, which means that an additional 2022 contribution of $1,000 nets you $220 to $240 in federal tax savings alone. If your state imposes income taxes as well, your tax savings increase that much more.

The Bottom Line

By the time you complete your 2022 tax return, you don't have many last-minute options to reduce your tax bill. But if you're a Health Savings Account owner who was eligible to contribute in 2022 and haven't deposited the maximum for that calendar year, you have another opportunity to do so before you submit your return.

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