Guides › HSA Last-Month Rule and Testing Period, With Examples

HSA Last-Month Rule and Testing Period, With Examples

Short answer: Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most people), you are treated as eligible for the entire year when figuring the contribution limit. But you must then stay an eligible individual through the testing period (December 1 through December 31 of the following year), or part of the contribution becomes taxable plus a 10% additional tax (Pub. 969).

The rule (Pub. 969)

• Eligible on December 1 and a given type of HDHP coverage that day → treated as having that coverage all year if you didn't otherwise have coverage.
• Your limit is the greater of (1) the Form 8889 instructions' Line 3 limitation chart/worksheet result or (2) the maximum annual HSA contribution for your coverage type on December 1.
• Testing period: begins with the last month of your tax year and ends on the last day of the 12th month after it (Pub. 969's example: December 1, 2025 through December 31, 2026).

If you fail the testing period

Unless the reason is death or becoming disabled, you include in income the contributions that wouldn't have been made except for the last-month rule, in the year you stop being eligible, plus a 10% additional tax, figured on Form 8889 Part III.

Made-up example (2027 limits)

You turn eligible on December 1, 2027 with self-only coverage and contribute $4,500 (the 2027 self-only limit, Rev. Proc. 2026-24). You stop being an eligible individual in June 2028, inside the testing period (through December 31, 2028).

• Prorated limit for 2027 on Pub. 969's method: 1 eligible month (December) × $4,500 ÷ 12 = $375.
• Amount that wouldn't have been allowed except for the rule: $4,500 − $375 = $4,125, included in your 2028 income and subject to the 10% additional tax (per the Pub. 969 pattern; use the Form 8889 worksheet for your real numbers).

If you stay eligible

Same facts, but you remain eligible through December 31, 2028: the $4,500 stays a normal contribution.

Things to check before using it

• Whether you really are eligible on December 1: no disqualifying coverage (for example a general-purpose FSA) and not enrolled in Medicare.
• Employer contributions count against the same limit.
• Expenses incurred before your HSA is established aren't qualified; under the last-month rule only expenses after you actually establish the HSA qualify (Pub. 969).
• The $1,000 age-55 amount is also part of the calculation; the Form 8889 instructions show how.

FAQ

Is December 1 always the date? For most taxpayers; the rule uses the first day of the last month of your tax year.

What if I die or become disabled? Those are the stated exceptions to the income inclusion.

Does the rule apply to a mid-year start? It can; compare with proration.

What we could not verify

• The 2027 Form 8889 instructions and worksheet (we used Pub. 969 (2025)).
• How the rule interacts with your state's tax treatment of HSAs.

Sources (official)

• IRS, Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans (Feb 11, 2026 print; for 2025 returns) — https://www.irs.gov/publications/p969 (read October 17, 2026)
• IRS, Rev. Proc. 2026-24 (2027 HSA, HDHP, DPCSA and HRA amounts) — https://www.irs.gov/pub/irs-drop/rp-26-24.pdf (read October 17, 2026)

Open the Year-End Planner →

Not tax/financial advice. Examples use made-up figures and have not been reviewed by a tax professional. See the disclosure.