The IRS announced that the 2020 tax filing deadline has been extended to July 15, 2020.
If you have a Health Savings Account (HSA), here’s some interesting news: you can make HSA contributions for the previous year before the tax deadline!
Sound too good to be true? Well, according to IRS publication 969, it is true. Here’s what you need to know about HSA contributions for the previous year:
The IRS allows for a significant amount of flexibility when it comes to HSA contributions. If you were enrolled in an HSA and a high deductible health plan (HDHP) in 2019, you can make contributions to your HSA up until the tax filing deadline on July 15.
So, if you were unable to max out your contributions during the last calendar year, you could make up those until this year’s tax deadline. It’s essentially a 15 1/2-month contribution window.
There are a couple of benefits to making HSA contributions for last year.
First, you can lower your tax burden. HSA contributions are not taxed (like withdrawals for qualified healthcare expenses). As you prepare your taxes, if you find that you still owe the IRS for last year, making HSA contributions can cut down how much you owe.
Second, you can add a little cushion to your account balance. If you were unable to contribute the full annual election for last year, you can make up for that and build up your balance. This is especially important because you can only spend what’s in your account. Plus, it does not change how much you can put into your HSA this year.
The additional dollars can add up over the long run, helping you earn more tax-free interest and allowing you to fully enjoy your HSA when you need it.
If you want to add contributions to your HSA for the previous year, contact your account administrator. It’s important to remember that you can only contribute up to the maximum annual limit. For 2019, that’s $3,500 for self-only coverage and $7,000 for family coverage. People age 55 and over (in 2019), can make an additional $1,000 contribution.
If you can, take advantage of this HSA tax “loophole.” Your wallet and your health will thank you for it.