How To Make Manual Contributions To An HSA - The Full Guide

A Health Savings Account or HSA allows you to make contributions tax free, the savings grow free of tax and can be withdrawn tax free for eligible costs and purchases. 

But if your employer doesn’t offer an HSA what does that mean for you? We look at how to make manual contributions to an HSA.

Also read: Change My Direct Deposit Information With The IRS

Contributing To An HSA Outside Of An Employer Plan

Making contributions to an HSA is simple when you have an employer sponsored plan. But what if your employer doesn’t offer a health plan or if you are self employed? How do you make manual contributions to an HSA outside of an employer plan?

HSAs are a great option for saving money on health care costs and offer exceptional tax benefits. You can even use your HSA like an IRA at retirement age. 

The advantages of having an HSA are clear so let’s take a look at how you can contribute to one outside of an employer plan. 

Also read: Get A Tax ID Number 

Who Is Eligible?

You can make manual contributions to an HSA, but you will still need to check your eligibility. 

In order to contribute to an HSA you need to be covered by a qualified High Deductible Health Plan beginning on the first day of the month. The qualifications are regulated by the Inland Revenue Code (IRC) which may be changed annually. 

 If you do have an HDHP that qualifies it will typically state that it is HSA eligible. 

You should also have no other health insurance cover except dental, vision, accident, disability or long term care. You should also not be covered by another health plan such as a spouse’s employer. 

If both spouses are eligible for HSA they can have separate plans, but contribution limits do apply. 

To be eligible for an HSA you also cannot be enrolled in Medicare although a spouse or children can be enrolled in Medicare or other coverage. You should not be claimed as a dependent on another person’s tax return. 

Also read: Is Health Insurance Tax Deductible?

How To Make Manual Contributions

If you are making manual contributions to a Health Savings Account you can set up a monthly recurring bank transfer. It is possible for you to choose the amount that you deposit each month and the date that the transfer should take place. 

You should set this up to be paid immediately after your first paycheck so that you begin saving straight away. However, contributions do not have to be distributed equally throughout the year, you can add extra contributions at any time up to the deadline. 

Alternatively you can make a one time deposit to your Health Savings Account. This can be made from your personal bank account, by sending a check to your provider or by making an online transfer to your HSA. 

One of the advantages of making manual contributions is that you can control your cash flow. If you have an expensive month you may be able to reduce your contributions for that month and reinstate them when your situation improves. 

With employer sponsored plans your contributions will be made automatically every month regardless of your financial or cash flow situation. 

When you make manual contributions to an HSA you still get the same tax benefits that you would get from payroll deductions through an employer plan. 

You can deduct your contributions when you file your tax return, the interest earnings on the HSA are not taxed and the funds are not taxed when they are used for eligible health costs and expenses. 

Also read: Tax strategies for high-income earners 

HSA Limits

There are limits to how much you can contribute to a Health Savings Account and you should be aware of not exceeding the limits set by the Internal Revenue Code. 

The maximum contribution to a Health Savings Account is $3,650 for just you. If you are making contributions for the whole family the maximum contribution amount is $7,300. 

For 2023 the contribution limits rise to $3,850 for you and for a family it goes up to $7,750. 

When Can You Make HSA Contributions?

The deadline for paying Health Savings Account contributions is the same as the tax deadline. This is usually April 15th unless that day falls on a holiday or weekend in which case it is moved to the next working day. 

Also read: Is Rent Tax-Deductible? 

Are Non-Payroll HSA Contributions Still Tax Deductible?

When you are making manual contributions your HSA provider should track them and send you Form 5498-SA to report all your contributions. This amount is entered onto your tax return, and it will decrease your tax liability for the year. 

Manual HSA contributions are deductible, and you should use Form 8889 for this purpose. 

When you pay this way the money you are contributing to the HSA will be post tax. This means that you will already have been taxed on this money, but you can get this refunded when you file your tax return. 

Contributions made through payroll deductions are pre-tax dollars and therefore reduce your taxable income. 

Deducting HSA Contributions

Non payroll Health Savings Accounts are tax deductible so even if you don’t have an employer sponsored plan a HSA is still a good option. 

The difference between a manually contributed HSA and one that is done via employer payroll deductions is how the tax benefits are realized. Contributions via payroll deductions are paid pre-tax which reduces the amount of your taxable income. 

When you pay your contributions manually outside of an employer sponsored HSA you will pay your tax upfront and then pay the contributions. You can then deduct your HSA contributions when you file your tax return. 

Final Thoughts

Health Savings Plans or HSAs have become increasingly popular in the last couple of decades as a way of saving for health care costs with excellent tax benefits. 

Making manual contributions will give you the same benefits through your plan as you would receive through payroll deductions. 

We hope this guide to making manual contributions to an HSA has been helpful. 

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