Can You Contribute to an HSA if You Only Had Coverage for a Short Time?

Health Savings Accounts (HSAs) are tax-advantaged accounts that allow you to save money for qualified medical expenses. To contribute to an HSA, you must be enrolled in a High Deductible Health Plan (HDHP).

In the post, the individual had an ACA plan that auto-renewed for 2023. However, they started a new job on December 19, 2022, and were covered by their employer’s insurance since then. They assumed that they didn’t need to terminate their ACA coverage because they didn’t elect to have it in 2023. However, this is not the case. They should have terminated their ACA coverage to avoid paying premiums for a plan they were not using.

The individual also asked if they could contribute to an HSA for 2023 since they technically had access to an HDHP in January. The answer to this question is no. To contribute to an HSA, you must be enrolled in an HDHP for the entire year. Since the individual was only enrolled in an HDHP for one month, they are not eligible to make any contributions to an HSA for 2023.

What is an HSA?

An HSA is a tax-advantaged savings account that allows you to save money for qualified medical expenses. Contributions to an HSA are made on a pre-tax basis, which means that they are deducted from your paycheck before taxes are calculated. This can save you money on your taxes.

HSAs can be used to pay for a variety of qualified medical expenses, including:

Doctor’s visits
Hospital stays
Prescription drugs
Dental and vision care
Long-term care

HSAs are a great way to save money for healthcare costs. However, it is important to note that you must be enrolled in an HDHP to contribute to an HSA.

What is an HDHP?

An HDHP is a health insurance plan with a high deductible. The deductible is the amount of money that you must pay out-of-pocket before your insurance coverage begins. HDHPs typically have lower monthly premiums than traditional health insurance plans.

To be eligible to contribute to an HSA, you must be enrolled in an HDHP. The minimum deductible for an HDHP in 2023 is $1,500 for individuals and $3,000 for families.

How to Contribute to an HSA

If you are enrolled in an HDHP, you can contribute to an HSA. Contributions can be made through your employer or through a private HSA provider.

The maximum amount that you can contribute to an HSA in 2023 is $3,850 for individuals and $7,750 for families. If you are 55 or older, you can contribute an additional $1,000.

Benefits of Contributing to an HSA

There are many benefits to contributing to an HSA. These benefits include:

Tax savings: Contributions to an HSA are made on a pre-tax basis, which means that they are deducted from your paycheck before taxes are calculated. This can save you money on your taxes.
Tax-free growth: Earnings in an HSA grow tax-free. This means that your money can grow faster than it would in a traditional savings account.
Tax-free withdrawals: Withdrawals from an HSA are tax-free if they are used to pay for qualified medical expenses.

HSAs are a great way to save money for healthcare costs. If you are enrolled in an HDHP, you should consider contributing to an HSA.