Can I make HSA contributions for 2018 (last year)?

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walletless
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Can I make HSA contributions for 2018 (last year)?

Post by walletless » Thu Jan 10, 2019 4:00 pm

I had a PPO (ineligible for HSA) plan from January to November 2018. Starting Nov 26 2018, I had a qualifying high-deductible plan through end of 2018. However, my employer's payroll requires 2 full payroll cycles to make contribution changes to HSA, so I could not make any HSA contributions in 2018 through my employer. I made over $6,900 in income from my employer through whom I had the high-deductible plan (Nov 26 to Dec 31 2018) and am married (filing jointly). I had an FSA plan with my first employer that terminated on Nov 23 (prior to joining the new employer on Nov 26).

So my question - can I still open and fund a 2018 HSA up to the federal max ($6,900) prior to April 15? Based on my understanding from irs.gov, in order to qualify:
  • Must have a qualifying high deductible plan on Dec 1
  • Your income must be higher than the contribution amount
  • Must fund the account before the tax filing deadline for that tax year (Apr 15 2018)
  • Must not be covered by an FSA plan that covers more than Vision and Dental

So based on that, I believe that I can open a new HSA (at Fidelity) and contribute towards my 2018 limit until Apr 15. However I just want to double check with the fine folks at bogleheads before I do so.

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Nate79
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Re: Can I make HSA contributions for 2018 (last year)?

Post by Nate79 » Thu Jan 10, 2019 4:27 pm

Two questions that will probably help others answer your question. Was your HSA plan a family plan or individual? What coverage will you maintain for the entire 2019?

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walletless
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Re: Can I make HSA contributions for 2018 (last year)?

Post by walletless » Thu Jan 10, 2019 4:28 pm

Nate79 wrote:
Thu Jan 10, 2019 4:27 pm
Two questions that will probably help others answer your question. Was your HSA plan a family plan or individual? What coverage will you maintain for the entire 2019?
Yes, family HSA plan.
I'll be maintaining a qualified high deductible plan for all of 2019.

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Nate79
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Re: Can I make HSA contributions for 2018 (last year)?

Post by Nate79 » Thu Jan 10, 2019 6:04 pm

I think the answer is yes but only because of the last month rule (google the term). Normally amount you can contribute is prorated based on number of months of coverage.

Spirit Rider
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Re: Can I make HSA contributions for 2018 (last year)?

Post by Spirit Rider » Thu Jan 10, 2019 6:16 pm

There is no compensation requirement to make HSA contributions. There is not even any taxable income requirement to make HSA contributions, but the higher the marginal tax rate, the more valuable the deduction.

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walletless
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Re: Can I make HSA contributions for 2018 (last year)?

Post by walletless » Thu Jan 10, 2019 6:45 pm

Super, thanks everyone. I will be making the contributions then.

This is my first time making a HSA contribution since I always had a non-qualifying health plan before. Are there forms that the HSA provider usually sends to claim the tax deduction at filing time, or do I have to manually report it into turbotax (or whatever filing tool I use)?

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Re: Can I make HSA contributions for 2018 (last year)?

Post by Spirit Rider » Thu Jan 10, 2019 9:30 pm

walletless wrote:
Thu Jan 10, 2019 6:45 pm
Super, thanks everyone. I will be making the contributions then.

This is my first time making a HSA contribution since I always had a non-qualifying health plan before. Are there forms that the HSA provider usually sends to claim the tax deduction at filing time, or do I have to manually report it into turbotax (or whatever filing tool I use)?
Contributions made by payroll deduction will be reported on your W-2 Box 12 Code W. When you enter or automatically download your W-2 information that will be captured for Form 8889 Line 9.

You will get Form 5498-SA from your HSA custodian and you will enter it and answer Tax Software questions on the direct contributions and eligibility, including under the last month rule. This will result in the completion of the rest of Form 8889 Part I, contributions.

You will get Form 1099-SA from your HSA custodian and you will enter it and answer Tax Software questions on distributions and this will complete Form 8889 Part II, Distributions.

You should not need to make Form 8889 manual entries, but you should familiarize yourself with the entries after complete. Plagiarizing a motto, when it comes to tax software, trust but verify.

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walletless
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Re: Can I make HSA contributions for 2018 (last year)?

Post by walletless » Fri Jan 11, 2019 4:03 pm

Spirit Rider wrote:
Thu Jan 10, 2019 9:30 pm
walletless wrote:
Thu Jan 10, 2019 6:45 pm
Super, thanks everyone. I will be making the contributions then.

This is my first time making a HSA contribution since I always had a non-qualifying health plan before. Are there forms that the HSA provider usually sends to claim the tax deduction at filing time, or do I have to manually report it into turbotax (or whatever filing tool I use)?
Contributions made by payroll deduction will be reported on your W-2 Box 12 Code W. When you enter or automatically download your W-2 information that will be captured for Form 8889 Line 9.

You will get Form 5498-SA from your HSA custodian and you will enter it and answer Tax Software questions on the direct contributions and eligibility, including under the last month rule. This will result in the completion of the rest of Form 8889 Part I, contributions.

You will get Form 1099-SA from your HSA custodian and you will enter it and answer Tax Software questions on distributions and this will complete Form 8889 Part II, Distributions.

You should not need to make Form 8889 manual entries, but you should familiarize yourself with the entries after complete. Plagiarizing a motto, when it comes to tax software, trust but verify.
Thanks. This makes sense in most normal year when the contributions from my employer and me will be reported on W-2. However, for 2018 I do not expect that to be true since my employers seed contribution for 2018 will be made by end of January 2019, and my own contributions to the HSA (using the last month rule called out above) will be made before tax filing in 2019. Given this, I do not believe the 2018 W-2 will have anything in it, and I do not expect the custodian to send me any 2018 forms either.. in that case, how do I report the data into turbotax?

Based on your response above, I believe I have to manually enter it such that:
1) Seed contributions from my employer in Jan 2019 (for TY 2018) will end up on Form 8889 Line 9
2) Contributions made by me before April 15 2019 (for TY 2018) will end up on Form 8889 Part I
3) I will have no distributions in TY 2018, so I will manually enter $0 for Form 8889 Part II

This is what TurboTax created when I went through the Interview format. Does that look correct?
(Assume $2,700 was employer seed contribution, $4,200 was my own contribution)

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venus_06
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Re: Can I make HSA contributions for 2018 (last year)?

Post by venus_06 » Fri Jan 11, 2019 4:54 pm

A related question:
My understanding is HSA deductions through payroll will be exempt from both income & FICA tax. However, if you contribute on your own, you may only claim the deduction for income tax, but still have to pay FICA taxes on that amount? Am I confusing things?
Asking because I switched employers in Nov 2018, and even though I elected to make contributions to my HSA for Nov and Dec 2018, those deductions haven't come through. Still haven't resolved things with HR, so don't know if the deductions will ultimately be taken or not, or if it will fall into my 2019 contributions... Anyhow, I looked into contributing directly to my HSA, thinking I could claim a deduction tax time, but not sure about the FICA taxes? Thanks!

bryanm
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Re: Can I make HSA contributions for 2018 (last year)?

Post by bryanm » Fri Jan 11, 2019 6:35 pm

venus_06 wrote:
Fri Jan 11, 2019 4:54 pm
My understanding is HSA deductions through payroll will be exempt from both income & FICA tax. However, if you contribute on your own, you may only claim the deduction for income tax, but still have to pay FICA taxes on that amount? Am I confusing things?
I believe this is correct. (There is an exception for non-employees, which doesn't appear to apply.)

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