Allowed to make a post-tax HSA contribution if pre-tax contributions are available through employer?

Question

I have a HSA, and my employer allows pre-tax HSA contributions. I'm working on my 2015 taxes and it turns out it would be beneficial to make a contribution now for 2015 (which I believe is possible?) and claim the deduction for doing so.

However I'm finding some conflicting information about whether it's permissible to make a post-tax deduction (which is what I'd be doing now for 2015, obviously) if it's possible to make pre-tax deductions. The only clear statement I can really find is from Wikipedia's article on HSAs which says:

Contributions from an employer or employee may be made on a pre-tax basis through an employer. If this option is not available through the employer, contributions may be made on a post-tax basis and then used to decrease gross taxable income on the following year's Form 1040.

However I don't think this is trustworthy. In particular I'm pretty sure that the contributions can be used t decrease taxable income on that year's 1040 so I'm not sure I believe the "if not available" clause.

I found this IRS publication which seems to say that this is allowed:

Contributions made by your employer are not included in your income. Contributions to an employee's account by an employer using the amount of an employee's salary reduction through a cafeteria plan are treated as employer contributions. Generally, you can claim contributions you made and contributions made by any other person, other than your employer, on your behalf, as an adjustment to income.

So, my employer can contribute their money, or my employer can contribute my money from my paycheck, and I can't claim it, but otherwise "generally" I can claim contributions made as an adjustment to income. In other words, even though I didn't set up my paycheck to contribute to the HSA, I can still do so now for 2015 and deduct it from my income.

Is this a correct analysis?

Answer 1

Yes, you are generally allowed to make contributions yourself to your HSA, even if your employer also made contributions.

Let me explain further.

The contribution limit for tax year 2015 is $3350 for individual coverage. (It is higher for family coverage, or for account holders age 55+.) The limit is for everything contributed to the HSA, whether it is an employer contribution or an account holder contribution. (In other words, if your limit is $3350, and your employer contributed $3000, you can only contribute $350.)

As far as the IRS is concerned, anything that your employer sends in is considered an employer contribution. This might be money from the company as part of a benefit, or it might be money deducted from your salary as part of a voluntary contribution on your part. Either way, if the employer sends it in, it is an employer contribution. None of this employer contribution shows up on your W-2 as taxable income, so you don't get to deduct it on your tax return. It has already been taken off of your income.

Money that you send in yourself with your after-tax dollars is your account holder contribution. This is money that you can deduct on your tax return, so that you aren't paying tax on this money.

So here is what you need to do:

1. Determine your total HSA contribution limit for tax year 2015.

2. Find out how much your employer has already contributed for 2015. The difference is how much you can still contribute for 2015.

3. Contact your HSA provider and find out how to make a 2015 contribution. Don't just send money in, because there is probably a form they want you to fill out to make a prior year contribution.

4. Get all this done by April 15, the deadline for making a prior year contribution. Actually, get it done before April 15, because often there will be some sort of delay of a day or two that will prevent you from doing this on the last day.

Answer 2

One aspect that may not be obvious - if you contribute to an HSA through payroll deduction, it comes out before the Social Security (6.2%) and Medicare (1.45%) taxes. Since a payroll contribution reduces your taxes by 7.65%, it's generally the better option.