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After landing a new job, I opened a health savings account (HSA) in February 2019. I decided to contribute $1 of my pay per pay period to my HSA. However, I can change my contribution amount at any time.

Recently I've been advised by my endodontist that a $10,000 operation is in order. If I'm having the operation in 5 pay periods, can I now start funneling in $2,000 per pay period into my HSA, enabling me to pay the bill in full through my HSA debit card, and expect to have $10,000 less in taxable income? Or, does the IRS lay out time restrictions for a scenario like this (in which case I can postpone my operation to next year and have the same result).

Chris W. Rea
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Liz Salander
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3 Answers3

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There's an annual contribution limit, for 2019 it is $3,500 single/$7,000 family. Otherwise, it's fine to match future contributions to prior or planned qualifying expenses so long as the account was established before the expenses were incurred.

There is no deadline for reimbursement, so if you have the procedure done now and pay out of pocket, you can contribute the annual maximum for a while and get reimbursed later.

The ideal scenario from a tax perspective is contributing the annual maximum to your HSA, paying all bills out of pocket and letting the funds grow tax-free for years before requesting reimbursement on all the expenses you paid out of pocket.

The ideal isn't practical for everyone, it requires saving receipts, paying attention to IRS rule-changes, having an HSA with good investment options, and being able to cover the medical expenses out of pocket.

Hart CO
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In addition to other answers: you do not have to pay for medical service in full in one lump sum. Often medical service providers agree on an interest-free installment plan with small monthly payments. And you can pay the installments from your HSA while pumping funds in there every paycheck.

There is a yearly limit to how much one can contribute into HSA. It's a tax year, so per-paycheck contributions need to be set to hit the limit by the end of the year if you start contributing right now. And then corrected down in the following year.

SolutionMill
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You should check with your employer to see if contibuting evenly through the year would maximize the employer match to your contribution. If that is the case, next year then you will have both reduced your taxable income and gotten a little bit more from the employer match.

The first reply post sounds right, check your contribution limit maximums.

Another option, You can pay for the treatment now, with credit card and reimburse yourself via the hsa in the future when your account balance reaches 10000. You would then be refunding yourself in pretax dollars.

akyeung
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