What is the 12 month rule for HSA?
Asked by: Carolyne Kemmer DVM | Last update: November 29, 2025Score: 4.3/5 (44 votes)
What is the HSA 13 month rule?
The annual HSA contribution limit for new HSAs is prorated for every month you weren't covered by an HDHP. But under the 13-month rule, you can still contribute the full amount to your HSA, even if you didn't have an HSA-eligible HDHP for the entire year.
Can I fully fund my HSA at the beginning of the year?
So you can full fund in December of that year or till the April of next year as you would know exactly how many months you were eligible. See below guide as an example. It shows you yearly maximum contribution limits based on number of months you have HSA eligible plan.
What happens if I don't use my HSA by the end of the year?
HSA money is yours to keep. Unlike a flexible spending account (FSA), unused money in your HSA isn't forfeited at the end of the year; it continues to grow, tax-deferred.
What is the last month rule for HSA 2024?
Here's the “Last Month” rule for HSA accounts, quoted directly from IRS Publication 969: “Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers).
HSAs "last month" rule
What is the downside of an HSA?
Drawbacks of HSAs include tax penalties for nonmedical expenses before age 65, and contributions made to the HSA within six months of applying for Social Security benefits may be subject to penalties. HSAs have fewer limitations and more tax advantages than flexible spending accounts (FSAs).
Does my HSA roll over year to year?
Unspent HSA funds roll over from year to year. You can hold and add to the tax-free savings to pay for medical care later.
Can I cash out my HSA?
Yes, you can withdraw funds from your HSA at any time. But please keep in mind that if you use your HSA funds for any reason other than to pay for a qualified medical expense, those funds will be taxed as ordinary income, and the IRS will impose a 20% penalty.
Can I use HSA for gym membership?
Gym memberships. While some companies and private insurers may offer discounts on gym memberships, you generally can't use your FSA or HSA account to pay for gym or health club memberships. An exception to that rule would be if your doctor deems fitness medically necessary for your recovery or treatment.
How much should I have in my HSA at retirement?
The amount of money you should have in your HSA during retirement depends on your healthcare needs and circumstances. According to the Fidelity Retiree Health Care Cost Estimate, a single person who is age 65 in 2023 should aim to have about $157,000 saved (after tax) for healthcare expenses during retirement.
What happens to HSA after 65?
One benefit of the HSA is that after you turn age 65, you can withdraw money from your HSA for any reason without incurring a tax penalty. You are, however, subject to normal income tax on any non-qualified withdrawals.
Can I cash out my HSA when I leave my job?
Yes, you can cash out your HSA at any time. However, any funds withdrawn for costs other than qualified medical expenses will result in the IRS imposing a 20% tax penalty. If you leave your job, you don't have to cash out your HSA.
Can I use HSA for dental?
Your HSA also covers expenses for standard dental cleanings and dental check-ups. One thing to keep in mind is that some of these procedures may have a co-payment, so it's important that you check with your dental insurance provider to find out exactly what you'll have to pay out of pocket.
At what age can you no longer have an HSA?
When you turn 65 and begin Medicare coverage, you lose HSA eligibility on the first day of that month. For example, if your birthday is April 19, you are no longer eligible to contribute to an HSA as of April 1.
Can I use my HSA to pay health insurance premiums if I retire early?
If you pay for your medical expenses out of pocket now, you'll have more saved in your HSA account to help pay for medical expenses once you retire. If you retire before age 65 and you aren't yet eligible for Medicare, you can use money in your HSA to pay your medical coverage premiums.
Do you pay taxes on HSA gains?
Any investment gains in an HSA aren't taxed, which could give your money potential to accumulate. Investing involves risk, including possible loss of the principal value.
Is an Apple Watch HSA eligible?
Even though Fitbits and Apple Watches measure important health data, they currently do not qualify for HSA reimbursement, as they are considered for general health use and not intended to treat or manage a specific medical condition.
Can I use HSA for vitamins?
In general, vitamins are not considered an HSA eligible expense unless they are prescribed by a doctor for a specific medical condition. For example, if your doctor prescribes prenatal vitamins during pregnancy or recommends vitamin D supplements to treat a deficiency, those could be eligible expenses under your HSA.
Can I use HSA for glasses?
Yes! You can definitely use funds from your flexible spending account (FSA) or health savings account (HSA) to purchase prescription glasses. (FSAs and HSAs can be used for many other vision- and eye health-related expenses, too, but we'll discuss that more in a bit.)
What happens to money in HSA if not used?
Unlike many other health plans, the balance in your HSA account carries over indefinitely. This means that any extra money you have at the end of the year does not disappear or reset. Instead, it remains in your account and continues to grow over time.
Is HSA better than 401k?
Comparing HSAs and 401(k)s
The triple-tax-free aspect of an HSA makes it better for tax management than a 401(k). However, since HSA withdrawals can only be used for healthcare costs, the 401(k) is a more flexible retirement savings tool. The fact that an HSA has no RMD gives it more flexibility than a 401(k).
Can I borrow from my HSA and pay it back?
No.
Should I max out my HSA every year?
If you're able to make the maximum contribution each year, then it's suggested that you do so. Some years you may need to use more of your HSA contributions than other years. Just remember, there's no yearly minimum you have to spend from your HSA and your entire HSA automatically rolls over each year.
What happens to HSA if you quit?
Many people have HSAs in conjunction with a job, but the HSA belongs entirely to the employee. If the person leaves their job, the HSA (and any money in it) goes with the employee. They are free to continue using the money for medical expenses and/or move it to another HSA custodian.
What happens if you use HSA for non-medical?
In addition, if HSA funds are withdrawn before age 65 and not used for eligible medical expenses are generally subject to an additional 20% tax penalty. In other words, you may lose the tax benefits when you use HSA for non-medical expenses. There may also be a significant tax fee or penalty.