Q. I had a high-deductible health insurance policy last year but don’t have one this year. Can I still contribute to a health savings account for 2016?
A. Yes. You have until April 18, 2017, to make your HSA contribution for 2016. To be eligible to make this contribution, you must have had an HSA-eligible health insurance policy with a deductible of at least $1,300 for individual coverage or $2,600 for family coverage in 2016, even if you don’t have one now. You can still open an HSA account now, if you don’t already have one.
The amount you can contribute is based on when you had the HSA-eligible policy. If you had it for the full year in 2016, you can make the full contribution: $3,350 for individual coverage or $6,750 for family coverage (plus $1,000 if you’re 55 or older).
If you had an HSA-eligible policy for only part of 2016, your contribution limit is generally based on the number of months you had the eligible coverage. If you had the eligible coverage for January through June (six months), for example, you can make half of the full year’s contribution.
A special rule applies if you had an HSA-eligible policy on December 1, even if you didn’t have it for the full year. In that case, you could still make the full year’s contribution as long as you keep an HSA-eligible policy for all of 2017.
Because you don’t have an HSA-eligible policy this year, you can avoid a penalty only by contributing to the HSA based on the number of months you had the eligible policy, even if you had coverage on December 1. If you contribute too much, you have to pay income tax and a 10% penalty on the difference between the amount you contributed and the amount you would have been eligible to contribute based on the number of months you actually had an HSA-eligible policy in 2016.
Article Created by Kiplinger