Can an individual who is not covered by a high-deductible health plan HDHP for the whole year contribute the maximum annual limit established by the IRS?
Yes, beginning in 2007, an individual who is an eligible individual during the last month of the tax year is treated as an eligible individual during every month of that tax year and can therefore make the maximum annual HSA contribution for that year. However, a recapture provision applies if the individual ceases to be an eligible individual during the testing period. Recapture means that federal income tax deductions are recaptured (i.e., included in gross income and subject, generally, to a 10 percent tax penalty) for the months the individual was not an eligible individual during the tax year. The testing period is the period beginning with the last month of the tax year for which the individual was an eligible individual and ending on the last day of the 12th month following that month. Example: John Smith establishes self-only HDHP coverage on June 1, 2010 and makes the maximum annual HSA contribution of $3,050 for 2010. He must continue to be an eligible individual through Dece
Related Questions
- Can an individual who is not covered by a high deductible health plan HDHP for the whole year contribute the maximum annual limit established by the IRS?
- If I enroll in the HDHP after January 1 but by December 1, can I still contribute the maximum annual HSA contribution for that year?
- What if I have contributed the maximum annual amount and am no longer covered by a high-deductible health plan?
