Emancipation Day, Patriots Day Extend Deadline to Fund an HSA for 2021

Most Americans aren't aware of these holidays. But even ignorance doesn't get in the way of an extended opportunity to fund a Health Savings Account.

You may be wondering why your tax-filing deadline isn't April 15 this year, as it usually is. There's a good explanation, which you'll learn below. And the delay creates an additional window - however small - to enhance your financial security.

Emancipation Day Effect

This holiday celebrates the freeing of slaves in the District of Columbia in 1862. The Emancipation Act freed more than 3,000 slaves. In addition, it compensated owners for the loss of their slaves, making the District the only public entity to do so.

Slave trade was abolished in the District via the Compromise of 1850 - a last-ditch (it turned out) attempt by Congress to settle the issue of slavery sufficiently to avoid sectional war. Alas, the Compromise fell short of that goal. And although it abolished the trade of human chattel, it didn't outlaw owning slaves. That victory would wait another dozen years with the events on what we now call Evacuation Day.

Interesting fact: The District of Columbia was the only government to compensate slave owners for the emancipation of their slaves.

The traditional due date of federal income taxes is April 15. That deadline is delayed when April 15 falls on a weekend or holiday. The revised deadline is the first business (non-weekend, non-holiday) day after the traditional deadline. In 2022, that day is Mon. April 18.

Patriots Day Effect

But wait! Residents of Massachusetts or Maine (which was part of Massachusetts until it became a separate state as part of the Compromise of 1820) have even more time. You see, Mon., April 18 is a holiday in these two states. What's that, you say? The third Monday in April is a holiday commemorating what many (particularly my fellow Bay Staters) view as the beginning of the American Revolution - the battles of Lexington and Concord. These two battles were fought after the "midnight ride of Paul Revere" west of Boston to Lexington to warn Samuel Adams and John Hancock of British soldiers' coming to arrest them (which, it turned out, wasn't true) and to Concord to warn of a British assault on colonial troops' gunpowder and arms.

Thus, residents of Massachusetts and Maine are freed of the obligation of last-minute work on their tax returns as they celebrate the beginning of the armed conflict that ended with American independence. Their deadline is Tues., April 19 (the actual day of the battles of Lexington and Concord). A procrastinator's dream - though probably not enough of an incentive to take up residence on the Bay State (it has a punitive estate-tax policy and high cost-of-living). And Patriots Day often has no effect on the due date of federal (and thus state) income tax returns. But it does provide a little extra time this year.

The Health Savings Account Effect

These delayed deadlines give you a few more days to find money to make a 2021 contribution to your Health Savings Account. Did you know that you have up to the earlier of the date that you file your personal income tax return or the date that your return is due to fund your account? You now have three more days (four if you live in Massachusetts or Maine) to turn over couch cushions, go through the pockets of your jeans, sell a vintage baseball card on e-bay, mow a neighbor's lawn, or throw caution to the wind and play the lottery to find extra money to contribute to your Health Savings Account.

When you make personal contributions, you deduct that amount on your federal and state (unless you're a California and New Jersey resident - these two states don't allow a deduction from state income taxes) tax returns. You don't avoid federal payroll (FICA) taxes as you do when you fund your account with pre-tax payroll deductions through your company's Cafeteria Plan. But you do receive credit for federal income taxes paid and most state income taxes as well.

The Bottom Line

It's always good to have more time to act in a way that enhances your financial future. But it may be less stressful to simply increase your 2022 payroll deductions to fund your account regularly with contributions that avoid payroll taxes (an instant 7.65% return for most workers)

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