Any eligible individual can contribute to an HSA. For an employee’s HSA, the employee, the employee’s employer, or both may contribute to the employee’s HSA in the same year. For an HSA established by a self-employed (or unemployed) individual, the individual can contribute. Family members or any other person may also make contributions on behalf of an eligible individual.

Contributions to an HSA must be made in cash. Contributions of stock or property aren’t allowed.

Limit on Contributions

The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. For 2019, if you have self-only HDHP coverage, you can contribute up to $3,500. If you have family HDHP coverage, you can contribute up to $7,000.

For 2020, if you have self-only HDHP coverage, you can contribute up to $3,550. If you have family HDHP coverage, you can contribute up to $7,100.

If you are, or were considered (under the last-month rule, discussed later), an eligible individual for the entire year and didn’t change your type of coverage, you can contribute the full amount based on your type of coverage. However, if you weren’t an eligible individual for the entire year or changed your coverage during the year, your contribution limit is the greater of:

The limitation shown on the Line 3 Limitation Chart and Worksheet in the Instructions for Form 8889, Health Savings Accounts (HSAs); or The maximum annual HSA contribution based on your HDHP coverage (self-only or family) on the first day of the last month of your tax year.

If you had family HDHP coverage on the first day of the last month of your tax year, your contribution limit for 2019 is $7,000 even if you changed coverage during the year.

Last-month rule. Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year. You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month if you didn’t otherwise have coverage.

Testing period. If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period. For the last-month rule, the testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month (for example, December 1, 2019, through December 31, 2020). If you fail to remain an eligible individual during the testing period, for reasons other than death or becoming disabled, you will have to include in income the total contributions made to your HSA that wouldn’t have been made except for the last-month rule. You include this amount in your income in the year in which you fail to be an eligible individual. This amount is also subject to a 10% additional tax. The income and additional tax are calculated on Form 8889, Part III.

Example 1. Chris, age 53, becomes an eligible individual on December 1, 2019. He has family HDHP coverage on that date. Under the last-month rule, he contributes $7,000 to his HSA. Chris fails to be an eligible individual in June 2020. Because Chris didn’t remain an eligible individual during the testing period (December 1, 2019, through December 31, 2020), he must include in his 2020 income the contributions made in 2019 that wouldn’t have been made except for the last-month rule. Chris uses the worksheet in the Form 8889 instructions to determine this amount. January -0- February -0- March -0- April -0- May -0- June -0- July -0- August -0- September -0- October -0- November -0- December $7,000.00 Total for all months $7,000.00 Limitation. Divide the total by 12 $583.33 Chris would include $6,416.67 ($7,000.00 – $583.33) in his gross income on his 2020 tax return. Also, a 10% additional tax applies to this amount.

Example 2. Erika, age 39, has self-only HDHP coverage on January 1, 2019. Erika changes to family HDHP coverage on November 1, 2019. Because Erika has family HDHP coverage on December 1, 2019, she contributes $7,000 for 2019. Erika fails to be an eligible individual in March 2020. Because she didn’t remain an eligible individual during the testing period (December 1, 2019, through December 31, 2020), she must include in income the contribution made that wouldn’t have been made except for the last-month rule. Erika uses the worksheet in the Form 8889 instructions to determine this amount. January $3,500.00 February $3,500.00 March $3,500.00 April $3,500.00 May $3,500.00 June $3,500.00 July $3,500.00 August $3,500.00 September $3,500.00 October $3,500.00 November $7,000.00 December $7,000.00 Total for all months $49,000.00 Limitation. Divide the total by 12 $4,083.33 Erika would include $2,916.67 ($7,000.00 – $4,083.33) in her gross income on her 2020 tax return. Also, a 10% additional tax applies to this amount.

Additional contribution. If you are an eligible individual who is age 55 or older at the end of your tax year, your contribution limit is increased by $1,000. For example, if you have self-only coverage, you can contribute up to $4,500 (the contribution limit for self-only coverage ($3,500) plus the additional contribution of $1,000). However, see Enrolled in Medicare , later.

If you have more than one HSA in 2019, your total contributions to all the HSAs can’t be more than the limits discussed earlier.

Reduction of contribution limit. You must reduce the amount that can be contributed (including any additional contribution) to your HSA by the amount of any contribution made to your Archer MSA (including employer contributions) for the year. A special rule applies to married people, discussed next, if each spouse has family coverage under an HDHP.

Rules for married people. If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If each spouse has family coverage under a separate plan, the contribution limit for 2019 is $7,000. You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses’ Archer MSAs. After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division.

The rules for married people apply only if both spouses are eligible individuals.

If both spouses are 55 or older and not enrolled in Medicare, each spouse’s contribution limit is increased by the additional contribution. If both spouses meet the age requirement, the total contributions under family coverage can’t be more than $9,000. Each spouse must make the additional contribution to his or her own HSA.

Example. For 2019, spouses Ginger and Lucy are both eligible individuals. They each have family coverage under separate HDHPs. Ginger is 58 years old and Lucy is 53. Ginger and Lucy can split the family contribution limit ($7,000) equally or they can agree on a different division. If they split it equally, Ginger can contribute $4,500 to an HSA (one-half the maximum contribution for family coverage ($3,500) + $1,000 additional contribution) and Lucy can contribute $3,500 to an HSA.

Employer contributions. You must reduce the amount you, or any other person, can contribute to your HSA by the amount of any contributions made by your employer that are excludable from your income. This includes amounts contributed to your account by your employer through a cafeteria plan.

Enrolled in Medicare. Beginning with the first month you are enrolled in Medicare, your contribution limit is zero. This rule applies to periods of retroactive Medicare coverage. So, if you delayed applying for Medicare and later your enrollment is backdated, any contributions to your HSA made during the period of retroactive coverage are considered excess. See Excess contributions , later.

Example. You turned age 65 in July 2019 and enrolled in Medicare. You had an HDHP with self-only coverage and are eligible for an additional contribution of $1,000. Your contribution limit is $2,250 ($4,500 × 6 ÷ 12).

Qualified HSA funding distribution. A qualified HSA funding distribution may be made from your traditional IRA or Roth IRA to your HSA. This distribution can’t be made from an ongoing SEP IRA or SIMPLE IRA. For this purpose, a SEP IRA or SIMPLE IRA is ongoing if an employer contribution is made for the plan year ending with or within the tax year in which the distribution would be made. The maximum qualified HSA funding distribution depends on the HDHP coverage (self-only or family) you have on the first day of the month in which the contribution is made and your age as of the end of the tax year. The distribution must be made directly by the trustee of the IRA to the trustee of the HSA. The distribution isn’t included in your income, isn’t deductible, and reduces the amount that can be contributed to your HSA. The qualified HSA funding distribution is shown on Form 8889 for the year in which the distribution is made. You can make only one qualified HSA funding distribution during your lifetime. However, if you make a distribution during a month when you have self-only HDHP coverage, you can make another qualified HSA funding distribution in a later month in that tax year if you change to family HDHP coverage. The total qualified HSA funding distribution can’t be more than the contribution limit for family HDHP coverage plus any additional contribution to which you are entitled.

Example. In 2019, you are an eligible individual, age 57, with self-only HDHP coverage. You can make a qualified HSA funding distribution of $4,500 ($3,500 plus $1,000 additional contribution).