Didn't Max Out Your HSA in 2023? It's Not Too Late

Healthcare is an expense that can arise at any time. So it's important to be prepared for it all the time.

To that end, you have choices. You could put more money into your savings account so you're equipped to deal with medical bills as they happen. But if you're eligible for a health savings account, or HSA, then it pays to contribute, since those accounts are loaded with tax breaks that a regular savings account won't offer.

For one thing, the money you put into an HSA goes in tax-free. A $1,000 contribution will mean not paying taxes on $1,000 of your earnings.

Another nice thing about HSAs is that you can invest the money you don't need to use right away. Investment gains in an HSA are tax-free, as are withdrawals for qualified medical expenses.

As is the case with other tax-advantaged accounts, like individual retirement accounts (IRAs) and 401(k)s, HSAs have contribution limits that can change from year to year. In 2023, HSA limits were as follows:

• $3,850 for self-only coverage for those under 55
• $4,850 for self-only coverage for those 55 and over
• $7,750 for family coverage for those under 55
• $8,750 for family coverage for those 55 and over

If you didn't max out your HSA in 2023, you may be kicking yourself now for losing out on the tax break. But there's some good news: You still have time to contribute to your account.

You have until April to fund last year's HSA

Some tax-advantaged accounts require you to make contributions during the calendar year they apply to only. For example, for money to count toward your 2023 401(k) plan, funds needed to hit your account between Jan. 1 and Dec. 31 of 2023.

HSAs work differently. So do IRAs, incidentally. With an HSA and IRA, you have until the following year's tax-filing deadline to finish making contributions. So if you put money into your 2023 HSA by April 15 of this year, it'll count toward last year's tax bill.

To put it another way, let's say that last year, you had self-only coverage and were 30, and you put $2,850 into your HSA. If you put another $1,000 into that account between now and April 15, that contribution will shield another $1,000 of your 2023 earnings from taxes.

Were you eligible for an HSA in 2023?

You may not have put any money into an HSA last year thinking you weren't eligible. In 2023, health plans were HSA-compatible if they had a minimum deductible of $1,500 and an out-of-pocket maximum of $7,500 for self-only coverage, or a minimum deductible of $3,000 and an out-of-pocket maximum of $15,000 for family coverage. The limits are a bit higher this year.

Take a look at your health plan from 2023 and see if it qualified for an HSA. If so, it's not too late to fund that account -- even if you contributed nothing last year.

Meanwhile, it pays to start working on your 2024 HSA contributions if you're eligible for one of these accounts this year. That'll be the case if you have a minimum deductible of $1,600 for self-only coverage or $3,200 for family coverage. This year's out-of-pocket maximums are $8,050 for self-only coverage and $16,100 for family coverage.

HSA eligibility can change from one year to the next. So even if you couldn't contribute in 2023, it doesn't mean an HSA is off the table in 2024. Take a look at your plan details so you know for sure.