A: Beginning with tax year 2007, an individual or family covered under an HDHP in a month other than January, may make a full HSA contribution for the year. So, even if you become eligible and enroll in an HDHP in December of 2007, you can still make an HSA contribution for 2007 as if you had been enrolled in the HDHP for all of 2007.
However, if you don’t remain an eligible individual in accordance with “The 12 Month Rule,” the amount of the distribution and contribution will be included in your gross income. “The 12 Month Rule,” or testing period, is the period beginning with the month of the contribution and ending on the last day of the 12th month following such month. The amount will be included for the taxable year of the first day during the testing period that the individual is not an eligible individual. A 10 percent additional tax also applies to the amount included.
Here is an example:
Let’s say that you enroll in an HDHP in December of 2007 and are otherwise an eligible individual in that month. For sake of the example assume that you are not an eligible individual in any other month in 2007. You could make an HSA contribution for 2007 as if you had been enrolled in the HDHP for all of 2007. In addition, if you ceased to be an eligible individual (e.g., if you stopped being covered under an HDHP) in June 2008, an amount equal to the HSA deduction attributable to treating you as an eligible individual for January through November 2007 would be included in your income in 2008.