Life happens—you get married, take a new job or have a baby. These and other qualified life events may affect your benefits, so it’s important to know when to take action. If you experience a qualified life event and change your health care coverage during the year, it can impact the amount you can contribute to a Health Savings Account (HSA).
Because HSA contribution limits set by the IRS are tracked on the calendar year, you may need to prorate your monthly contribution rate to ensure you are contributing up to the annual limit. Let’s take a look at some different scenarios and how each might impact HSA contributions.
Your eligibility to make contributions to an HSA can change during the year because you add or drop an HSA-eligible high-deductible health plan (HDHP). This may happen because you got a new job or decided to switch health plans. Since you would be eligible to contribute to your HSA only part of the year, you will need to prorate your HSA contribution based on the number of months you are eligible.
Jill starts a new job in April and enrolls in an HSA-eligible health plan at her new company. She knows that with individual coverage she can contribute up to $4,150 in 2024. But since she is only eligible to contribute part of the year, she has to prorate her contribution limit to ensure she contributes up to the maximum allowed during the calendar year.
To calculate her prorated contribution:
She starts with the individual contribution limit for 2024
Divides by 12
Multiplies by the number of months she is eligible to contribute
If you are 55 and older and your HSA eligibility changes during the year, you will also need to prorate your catch-up contribution. For example, Anton enrolls in Medicare on June 1 and is no longer eligible to contribute to his HSA.
He starts with the total available catch-up contribution amount ($1,000 for 2024)
Divides by 12
Multiplies by the number of months he is eligible to contribute
For 2024, you can reference this chart to find the prorated contribution that applies to your situation.
| Number of months | Family | Individual |
|---|---|---|
| 12 months | $8,300 | $4,150 |
| 11 months | $7,608 | $3,804 |
| 10 months | $6,916 | $3,458 |
| 9 months | $6,225 | $3,112 |
| 8 months | $5,533 | $2,766 |
| 7 months | $4,841 | $2,420 |
| 6 months | $4,150 | $2,075 |
| 5 months | $3,458 | $1,729 |
| 4 months | $2,766 | $1,383 |
| 3 months | $2,075 | $1,037 |
| 2 months | $1,383 | $691 |
| 1 months | $691 | $345 |
If you are eligible to contribute to your HSA on the first day of the last month of your tax year (December 1), you are considered eligible for the entire year and can contribute the full amount allowed. However, there is one condition: You need to stay enrolled in an HSA-qualifying HDHP through the end of the following calendar year. If you don’t, you could owe income tax and an additional tax penalty on contributions in excess of the prorated amount.
Changes in status, such as marriage or a birth of a child, could change your coverage from individual to family or, in the cases of divorce or death of a spouse, from family to individual. Let’s look at an example to understand how this might affect your contribution limit.
Jack is getting married May 1 and will update his HSA coverage from individual to family. He is eligible to contribute at the individual rate from January through April and at the family level from May through December. Using the table above, he can easily calculate his prorated contribution for the year as follows:
Under the last-month rule, Jack could decide to contribute the family maximum of $7,750 in 2023, as long as he maintains family coverage through December 31, 2024.
If you anticipate a status change during the coming year, it is important to understand how it can affect your annual HSA contribution limit to ensure you are contributing up to the maximum allowed. Be sure to bookmark this page to reference the proration chart and calculations that can help keep you on track.
Current Health Savings Account (HSA) contribution limits for single coverage, family coverage, and catch-up contributions (for those who are age 55 or older).
Understand the fundamentals of contributing to your HSA.
About Triple Tax Advantages: You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. Any interest or earnings on the assets in the account are tax free. You may be able to claim a tax deduction for contributions you, or someone other tahn your employer, make to your HSA. Bank of America recommends you contact qualified tax or legal counsel before establishing an HSA.
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Bank of America, N.A. makes available The HSA for Life® Health Savings Account as a custodian only. The HSA for Life is intended to qualify as a Health Savings Account (HSA) as set forth in Internal Revenue Code section 223. However, the account beneficiary establishing the HSA is solely responsible for ensuring satisfaction of eligibility requirements set forth in IRC sec 223. If an individual/employee establishes a HSA and s/he is not otherwise eligible, s/he will be subject to adverse tax consequences. In addition, an employer making contributions to the HSA of an ineligible individual may also be subject to tax consequences. We recommend that applicants and employers contact qualified tax or legal counsel before establishing a HSA.
Bank of America does not sponsor or maintain the Flexible Spending Accounts (FSA) / Health Reimbursement Accounts (HRA) that you establish. The programs are sponsored and maintained solely by the employer offering the plan, or by an individual establishing an independent plan. Bank of America acts solely as claims administrator performing administrative tasks pursuant to an agreement with, and at the direction of, the sponsoring employer or individual under an independent plan. The sponsoring employer or individual under an independent plan is solely responsible for ensuring such arrangements comply with all applicable laws.
The planning tools and information calculators are illustrative only, and accuracy is not guaranteed. They are intended to provide a comparative tool for various consumer health care options and potential costs and savings of those options. Bank of America and its affiliates are not tax or legal advisors. The calculators are not intended to offer any tax, legal or financial advice and do not assure the availability of or your eligibility for any specific product offered by Bank of America or its affiliates. Please consult with qualified professionals to discuss your situation. This site may contain links to third-party content, which may be articles, videos, or calculators, regarding health plans only as a convenience. Some articles, videos and calculators may have been written and produced by third parties not affiliated with Bank of America or any of its affiliates.
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Please consult with your own attorney or tax advisor to understand the tax and legal consequences of establishing and maintaining a HSA, FSA, Dependent Care FSA, and/or HRA plan.
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Mutual Fund investment offerings for the Bank of America HSA are made available by Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a registered broker-dealer, registered investment adviser, Member SIPC, and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”). Investments in mutual funds are held in an omnibus account at MLPF&S in the name of Bank of America, N.A., for the benefit of all HSA account owners. Recommendations as to HSA investment menu options are provided to Bank of America, N.A. by the Chief Investment Office (“CIO”), Global Wealth & Investment Management (“GWIM”), a division of BofA Corp. The CIO, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for GWIM clients, is part of the Investment Solutions Group (ISG) of GWIM.
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