@ehj8ehj8 wrote:
Thank you so much for your response. Just one more quick question on this: I had an FSA during 2020 that ended in September. I spent the last money left in the account in October. Can I still contribute the full amount for 2020? Thank you!
You can contribute to an HSA in your name, retroactive to 2020, as long as you do it before May 17, 2021. You will also have to tell the HSA bank this is a 2020 transaction so they process it correctly. Then, you can take the tax deduction on your 2020 tax return.
The amount you can contribute can be calculated in 2 ways.
If you use the last month rule, you can contribute the full amount for 2020. This would mean that, if you were covered by a family HDHP on December 1, 2020, you can contribute the full amount, as if you were covered all year. However, if you lose your HDHP coverage at any time during 2021, you retroactively lose your 2020 eligibility, and will be subject to additional income tax and penalties. The full amount would be $7100 for a family HDHP or $3550 for a single HDHP, minus any amounts already contributed to an account in your name.
Or, you can contribute based on your eligibility on a month by month basis. You are eligible to contribute up to $295 or $591 for each month that you had eligible HDHP coverage (and no other disqualifying coverage) -- eligibility is determined on the first day of each month. And you have to account for any amount already contributed, of course. If you use the month-by-month method for your 2020 contributions, you don't run into problems if your health insurance changes in the middle of 2021.
