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Take 12 Months of Deductions in One Month

HSAs have a last-month of the tax-year rule.

An individual is considered eligible for an HSA for an entire year, if they had a high deductible health plan (HDHP) on the first day of the last month of their tax year (December 1 for most taxpayers).

For example, an HSA accountholder could make a full contribution for 2014 on December 1st, and then in January, make a full contribution for 2015.

Keep in mind the account holder must remain eligible during the testing period. The testing period begins on the first day of the last month of the individual’s tax year and ends on the last day of the 12th month.

Using the above example, the individual must remain covered by a qualified HDHP through December 31, 2015 (which most people do). See IRS Publication 969 page 5 for more information.

Author: Jennifer Harris