Counting Months for the HSA Last-Month Rule: Twelve to Fund, Thirteen to Keep

One December, Two Defensible Numbers

Someone with no high deductible health plan for eleven months of 2026 picks up family coverage on December 1. How much can go into a health savings account for the 2026 tax year?

Two answers fall out of the same subsection. One is a little over $729. The other is $8,750. Neither is a misreading; they are what you get depending on which sentence of section 223(b) you stop at. And which one was correct for 2026 is not settled in 2026. Under the text, it cannot be settled in the taxpayer's favor before December 31, 2027, and it can go the other way in any month before then.

The text sits at the Office of the Law Revision Counsel's 26 U.S.C. § 223, Health savings accounts. Read subsection (b) in order and both numbers appear.

What the Limitation Is Built From

Paragraph (b)(1) states no annual cap. It states a sum: "The amount allowable as a deduction under subsection (a) to an individual for the taxable year shall not exceed the sum of the monthly limitations for months during such taxable year that the individual is an eligible individual."

The primitive is the month, and paragraph (b)(2) supplies it: "The monthly limitation for any month is 1/12 of- (A) in the case of an eligible individual who has self-only coverage under a high deductible health plan as of the first day of such month, $2,250. (B) in the case of an eligible individual who has family coverage under a high deductible health plan as of the first day of such month, $4,500."

Those are base amounts that subsection (g) indexes. For the current year, IRS Rev. Proc. 2025-19, 2026 inflation adjusted amounts for HSAs publishes the results: "For calendar year 2026, the annual limitation on deductions under § 223(b)(2)(A) for an individual with self-only coverage under a high-deductible health plan is $4,400." And: "For calendar year 2026, the annual limitation on deductions under § 223(b)(2)(B) for an individual with family coverage under a high-deductible health plan is $8,750."

Note where "first day" sits in (b)(2). The monthly limitation turns on coverage as of the first of the month, and (c)(1)(A) uses the same anchor: "(i) such individual is covered under a high deductible health plan as of the 1st day of such month, and". Coverage starting December 2 does not buy December. So: eleven months at zero, one month at one twelfth of $8,750. That is the first answer.

The Eleven Months the Statute Hands You

Then comes paragraph (b)(8). Subparagraph (A) reads: "For purposes of computing the limitation under paragraph (1) for any taxable year, an individual who is an eligible individual during the last month of such taxable year shall be treated- (i) as having been an eligible individual during each of the months in such taxable year, and (ii) as having been enrolled, during each of the months such individual is treated as an eligible individual solely by reason of clause (i), in the same high deductible health plan in which the individual was enrolled for the last month of such taxable year."

Two moves, not one. Clause (i) fills in the eleven missing months of eligibility. Clause (ii) fills in the coverage type for exactly those months by copying December's plan, which is why a December family plan produces a family answer for January through November, when no plan existed.

Now (b)(1) sums twelve non-zero months instead of one, each one twelfth of $8,750, for a total of $8,750. That is the second answer.

The form makes this visible. The worksheet in the IRS Instructions for Form 8889, Health Savings Accounts (HSAs) walks month by month, asking "What type of coverage did your HDHP provide on the first day of the month?", enters the annual amount for each qualifying month, then closes with one line: "Limitation. Divide the total by 12. Enter here and on line 3". Twelve entries of $8,750 divided by twelve is $8,750. One entry divided by twelve is $729.1666..., which does not land on a cent.

Thirteen Months, Not Twelve

Subparagraph (B) of (b)(8) is the price of subparagraph (A), and the clock in it is longer than a year. Clause (iii) defines the term: "The term 'testing period' means the period beginning with the last month of the taxable year referred to in subparagraph (A) and ending on the last day of the 12th month following such month."

Count it. The last month of taxable year 2026 is December 2026; twelve months following it ends at December 2027; the last day of that month is December 31, 2027. December 1, 2026 through December 31, 2027 is thirteen calendar months. IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans gives the same span one year earlier: the testing period "begins with the last month of your tax year and ends on the last day of the 12th month following that month (for example, December 1, 2025, through December 31, 2026)."

So an $8,750 contribution made in December 2026 has to survive thirteen months of eligibility. The publication states the obligation: "If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period."

One carve-out exists, and it is narrow. Clause (ii): "Subclauses (I) and (II) of clause (i) shall not apply if the individual ceased to be an eligible individual by reason of the death of the individual or the individual becoming disabled (within the meaning of section 72(m)(7))." Death and disability, with disability supplied by cross-reference. Changing jobs is not on that list.

The Clawback Is a Difference, Not a Balance

Failing the testing period does not unwind the whole contribution. Clause (i)(I) of (b)(8)(B) increases gross income "by the aggregate amount of all contributions to the health savings account of the individual which could not have been made but for subparagraph (A)."

That phrase describes a subtraction, and the Form 8889 instructions give the procedure: "You can use the Line 3 Limitation Chart and Worksheet (in these instructions) for the year the contribution was made to determine the contribution you could have made if the last-month rule did not apply," and then "Enter on line 18 the excess of the amount contributed over the redetermined amount."

Publication 969 works an example on the 2025 family limit of $8,550. The taxpayer becomes eligible December 1, 2025, contributes $8,550, and fails in June 2026: "You would include $7,837.50 ($8,550.00 − $712.50) in your gross income on your 2026 tax return." The $712.50 is one twelfth of $8,550, the month genuinely earned. Eleven twelfths come back; one twelfth stays.

Then clause (i)(II) adds a second charge: "the tax imposed by this chapter for any taxable year on the individual shall be increased by 10 percent of the amount of such increase." Ten percent of $7,837.50 is $783.75. The publication agrees: "Also, a 10% additional tax applies to this amount." Note the base: the ten percent runs on the income inclusion, not the account balance.

Which Return Carries It

The year of inclusion is easy to get wrong, because contribution and failure sit in different years. Clause (i)(I) is explicit: the increase lands in "gross income of the individual for the taxable year in which occurs the first month in the testing period for which such individual is not an eligible individual."

In the published example the money went in for 2025 and the inclusion lands on the 2026 return. Publication 969 says so: the taxpayer "must include in your 2026 income the contributions made for 2025 that wouldn't have been made except for the last-month rule." A December 2026 funding that breaks in June 2027 is therefore reported on the 2027 return, not by amending 2026.

This is the shape of the estimated tax safe harbor, where paying last year's tax in full is measured against a prior year's return.

The Catch-Up Rides the Same Twelfths

The age 55 addition is not a bonus sitting outside the monthly machinery. Paragraph (b)(3)(A) says that for someone who "has attained age 55 before the close of the taxable year, the applicable limitation under subparagraphs (A) and (B) of paragraph (2) shall be increased by the additional contribution amount." What it raises is the applicable limitation in (b)(2)(A) and (B), the annual dollar amount of which the monthly limitation is one twelfth, so the catch-up passes through the division rather than sitting outside it.

The worksheet folds it into each month's entry: "Enter $8,550 on the line below for the month. If, at the end of 2025, you were unmarried and age 55 or older, enter $9,550 for the month". Read that conditional. The larger family figure is keyed to being unmarried. Paragraph (b)(3)(A) attaches the additional contribution amount to "an individual who has attained age 55 before the close of the taxable year," one individual at a time; the worksheet states the unmarried condition without giving a reason for it.

The amount comes from a table in (b)(3)(B) that runs $500 for 2004, rises annually, then stops: "2009 and thereafter $1,000." Publication 969 restates it: an eligible individual age 55 or older at the end of the tax year has a "contribution limit ... increased by $1,000."

Why the Family Cap Is Not Twice the Single Cap

Look at how (c)(2)(A) writes the high deductible health plan thresholds. The family figures are not stated in dollars at all. The plan must have "an annual deductible which is not less than- (I) $1,000 for self-only coverage, and (II) twice the dollar amount in subclause (I) for family coverage, and" and a combined figure, "the sum of the annual deductible and the other annual out-of-pocket expenses required to be paid under the plan (other than for premiums) for covered benefits", that "does not exceed- (I) $5,000 for self-only coverage, and (II) twice the dollar amount in subclause (I) for family coverage." Family is a multiple, so indexing the self-only figure drags family along exactly.

The contribution cap in (b)(2)(B) is written the other way. It states its own dollar amount. Subsection (g)(1) reaches both provisions in one sentence, "Each dollar amount in subsections (b)(2), (c)(2)(A), and in the case of taxable years beginning after 2026, (c)(1)(E)(ii)(II) shall be increased by an amount equal to" the adjustment it goes on to describe. But (c)(2)(A) holds only two dollar amounts and both are self-only, while (b)(2) holds one for each coverage type. So the family contribution figure is indexed as its own dollar amount, and (g)(2) then rounds: "If any increase under paragraph (1) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50." Two amounts, two roundings.

The 2026 figures show the drift. Deductible floor: $1,700 and $3,400, exactly double. Out-of-pocket ceiling: $8,500 and $17,000, exactly double. Contribution cap: $4,400 and $8,750, where twice $4,400 is $8,800. The family cap is $50 short of double.

For 2027 the gap closes. IRS Rev. Proc. 2026-24, 2027 inflation adjusted amounts for HSAs gives $4,500 and $9,000, exactly double, alongside a deductible floor of "$1,750 for self-only coverage or $3,500" and out-of-pocket amounts that "do not exceed $8,700 for self-only coverage or $17,400 for family coverage." The year-over-year moves are $100 and $250. What (g)(2) rounds is not that move but the increase over the base amount in (b)(2), $2,250 and $4,500, and because each published figure is a base plus a multiple of $50, the move between two years lands on a multiple of $50 as well. The 2027 doubling is a rounding coincidence, not a rule.

Numbers to Re-check

Three pieces of this chain move on their own schedules.

First, the contribution amounts. Subsection (g)(1) carries a mechanism and a deadline: "In the case of adjustments made for any taxable year beginning after 2007, section 1(f)(4) shall be applied for purposes of this paragraph by substituting 'March 31' for 'August 31', and the Secretary shall publish the adjusted amounts under subsections (b)(2), (c)(1)(E)(ii)(II), and (c)(2)(A) for taxable years beginning in any calendar year no later than June 1 of the preceding calendar year." That June 1 deadline is why HSA figures are fixed seven months before the tax year they govern even begins, the opposite habit from the wage series behind indexing the Social Security earnings test, which looks two years back.

The substitution lands in one place. Section 1(f)(4) of 26 U.S.C. § 1 reads: "For purposes of paragraph (3), the CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year." Section 1(f)(6) names August twice more on its own terms: in (A), "the initial value of the Chained Consumer Price Index for All Urban Consumers for the month of August for the preceding calendar year," and in (B), "the 12-month period ending on August 31." Rev. Proc. 2025-19 publishes a result, not a derivation.

Second, the index values get revised. The Bureau of Labor Statistics FAQ on the Chained Consumer Price Index for All Urban Consumers states: "The preliminary C-CPI-U is issued first in initial form, and subject to 3 interim revisions, with final data posted 10-12 months after the initial release." Section 1(f)(6)(A) points to values published as of a fixed date, so a later revision does not reopen a limit already published.

Third, the additional contribution amount. Subsection (g)(1) lists the subsections it adjusts, and the table in (b)(3)(B) ends at "2009 and thereafter $1,000." Check both against the current text each year.

Where This Doesn't Apply

The last-month rule needs a last month that qualifies, and several situations remove one.

Medicare is the big one. Paragraph (b)(7): "The limitation under this subsection for any month with respect to an individual shall be zero for the first month such individual is entitled to benefits under title XVIII of the Social Security Act and for each month thereafter." Publication 969 phrases it in enrollment terms: "Beginning with the first month you are enrolled in Medicare, your contribution limit is zero." The two sentences do not use the same trigger word, and the worksheet asks the enrollment question directly, opening each month with "Were you enrolled in Medicare for the month?" and instructing "Enter -0- on the line below for the month" if yes. For anyone turning 65 inside a testing period, timing matters, and Medicare.gov, When does Medicare coverage start? gives two different starts. For someone who qualifies for premium-free Part A, "Your Part A coverage starts the month you turn 65. (If your birthday is on the first of the month, coverage starts the month before you turn 65.)" For someone who signs up after 65, the start runs backward instead: "Your Part A coverage starts 6 months back from when you sign up or when you apply for benefits from Social Security (or the Railroad Retirement Board). Coverage can't start earlier than the month you turned 65." That second branch is the one a testing period has to watch, because (b)(7) fixes the limitation at zero from the first month of entitlement onward, and a start dated six months back moves that first month six months earlier than the sign-up.

A year ending without qualifying coverage routes straight to proration. The Form 8889 instructions: "If you were not an eligible individual on the first day of the last month of your tax year, use the Line 3 Limitation Chart and Worksheet (in these instructions) to determine the amount to enter on line 3."

The two texts are also not worded identically on whether the fill-in is automatic. Section 223(b)(8)(A) reads as a computation rule: an eligible individual in the last month "shall be treated" as eligible in every month. The instructions read permissively: "You may consider yourself an 'eligible individual' for the entire year if you are an eligible individual on the 1st day of the last month of the tax year (December 1, for most individuals)." Anyone sizing a December contribution is choosing between two figures that the two documents relate in different grammar.

The downside arithmetic is not in doubt. One twelfth is what a single eligible December earns. The other eleven twelfths are advanced against thirteen months of eligibility, and if that period breaks, the advance returns as ordinary income plus ten percent, on the return for the year of the break. The same discipline applies as in reading a garnishment order by running two caps: compute both numbers, then work out which one the text makes binding.