Set up payroll deductions with your employer
The easiest way to contribute to your HSA is through your employer’s pre-tax payroll deduction program.
Contributing even $100 a month to your HSA can quickly build a nest egg for health care needs that will help bridge the gap between the contributions your employer may make to your account and your deductible level. Plus, you get a triple tax benefit:
- Reduce taxable income - HSA contributions through payroll are made pre-tax, which lowers tax liability on paychecks. Manual contributions are tax deductible when filing taxes each year.
- Tax-free earnings - Interest growth earned on HSA funds is never taxed.
- Tax-free distributions - HSA funds are not taxed when used for eligible expenses.
Contribute savings from HDHP premiums
Your HSA-qualified health plan is a high-deductible health plan (HDHP). Most HDHPs have lower monthly premiums than traditional health plans. Consider contributing the money you save by having a lower premium to your HSA.
Make the maximum HSA contribution at the beginning of the year
While you typically have until April 15 of the following year to make HSA deposits, contributing the maximum dollar amount to your HSA at the beginning of each year allows you to take full advantage of the tax-free growth in your account by letting the funds earn interest for the entire year. The extra interest you earn by contributing to your account on January 1 of each year could be significant over 20 years or more. Family coverage allows you to grow your account even more since you can contribute $7,200 in 2021. The limit for 2022: not yet announced.
Announced on March 17, 2021, the IRS is allowing HSA holders to make HSA contributions for the 2020 tax year until May 17, 2021. Account holders can also make withdrawals for excess contributions up to this deadline. Three states affected by the winter storms, Texas, Oklahoma, and Louisiana, were granted an additional extension. Members filing in these states now have until June 15 of this year to make HSA contributions and excess contribution withdrawals for the 2020 tax year.
If you're over 55, you can make catch-up contributions of $1000 a year on top of the IRS's annual limit of $3,600 in 2021. The limit for 2022: not yet announced.
See Catch-up contributions to learn more.