Millions of Americans struggle to keep up with health-related expenses. If you're one of them, and are eligible for a health savings account (HSA), then you should know that the more money you put into one, the more tax savings you stand to reap.

HSA funds go in on a tax-free basis, so if you contribute $1,000 to your account in a given year, that's $1,000 of income the IRS won't tax you on. Your exact savings will depend on the tax bracket you fall into, but if you're in the 24% bracket, you shave $240 off your tax bill.

If you're hoping to lower your taxes in 2020, maxing out your HSA is a great way to start. But here's some more good news: If you didn't max out last year's HSA, it's actually not too late to do so. You have until this year's April 15 filing deadline to finish funding your 2019 HSA, and if you're able to sneak some additional money into that account between now and then, you could wind up much happier when you file your 2019 return.

An HSA form on a clipboard, next to bills and a stethoscope


How HSAs work

An HSA is a tax-advantaged savings plan designed specifically to help you pay for medical expenses. HSA eligibility hinges on being enrolled in a high-deductible health insurance plan, defined this year as an individual deductible of $1,400 or more, or a family deductible of $2,800 or more. Your plan must also come with an annual out-of-pocket maximum of $6,900 at the individual coverage level, or $13,800 for family coverage.

Assuming you qualify for an HSA, you can contribute up to $3,550 this year as an individual, or up to $7,100 as a family. You also get a $1,000 catch-up option, similar to the catch-up contributions offered by popular retirement savings plans like IRAs and 401(k)s, if you're 55 or older.

Any funds you put into your HSA go in on a pre-tax basis, saving you money immediately, the same way you lower your tax burden by contributing to a traditional IRA or 401(k). But the nice thing about HSAs is that they're triply tax-advantaged. In addition to contributions being tax-free, any money you don't withdraw from your HSA immediately can be carried forward indefinitely and invested for added growth. And any gains you see in your account are yours tax-free, which means if you grow a $4,000 balance to $5,000 with smart investments, that extra $1,000 is yours free and clear. HSA withdrawals are also tax-free, provided they're used for qualified medical expenses.

Eke out extra savings for 2019

If you didn't contribute the maximum allowable amount to your 2019 HSA, then you still have a chance to fund that account, provided you do so by April 15 of this year. That means you'll have a last-minute chance to lower your 2019 taxes, all the while giving yourself more money to use for healthcare expenses.

Now one thing you should note is that HSA contribution limits were lower in 2019 than they are this year. For 2019 purposes, you can put up to $3,500 into your account if you're saving as an individual, or up to $7,000 if you're saving at the family level. The $1,000 catch-up for savers 55 and over is the same.

Let's imagine you have individual health coverage and only put $2,000 into last year's HSA. If you manage to add another $1,500 between now and April 15, and you're in the 24% tax bracket, that saves you $360 on your 2019 tax bill.

To be clear, maxing out an HSA is always worthwhile. But if you're not sure whether to push yourself to come up with those extra funds in the next few months, wait to get your tax forms and then go through the motions of filing your 2019 return to see where you stand financially. If it turns out you owe money to the IRS, putting that extra cash into last year's HSA could negate that underpayment and even score you a refund.