What happens to HSA money when you go on Medicare?
Asked by: Shaun Senger | Last update: July 30, 2023Score: 4.9/5 (15 votes)
Although you can't make any more contributions to your HSA once you're enrolled in Medicare, your HSA will continue to provide tax-free funds to cover medical costs until you use up all the money in your account. You also have the option to use your HSA funds as a regular retirement account after you turn 65.
Do I lose my HSA when I go on Medicare?
Can I continue to contribute to my HSA once I'm enrolled in Medicare? No. You lose HSA eligibility once you enroll in Medicare, so you can't make additional contributions. You can contribute for months that you were eligible before you enrolled in Medicare.
How does an HSA work with Medicare?
Even after you enroll in Medicare and stop HSA contributions, you are still able to withdraw funds tax-free for qualified medical expenses. You can even use your HSA to pay for some Medicare expenses including your Medicare Part B, Part D and Medicare Advantage plan premiums, deductibles, copays and coinsurance.
What happens to my HSA account when I turn 65?
At age 65, you can take penalty-free distributions from the HSA for any reason. However, in order to be both tax-free and penalty-free the distribution must be for a qualified medical expense. Withdrawals made for other purposes will be subject to ordinary income taxes.
Can you use HSA funds once on Medicare?
Yes. Even if enrolled in Medicare, you may keep an HSA if it was in existence prior to Medicare enrollment. You can spend from your HSA to help pay for medical expenses, such as deductibles, premiums, copayments, and coinsurances. If you use the account for qualified medical expenses, it will continue to be tax-free.
Learn What Happens to Your HSA with Medicare
Why can't Medicare recipients have an HSA?
If you enroll in Medicare Part A and/or B, you can no longer contribute pre-tax dollars to your HSA. This is because to contribute pre-tax dollars to an HSA you cannot have any health insurance other than an HDHP.
Do you have to pay taxes on HSA after 65?
At age 65, you can withdraw your HSA funds for non-qualified expenses at any time although they are subject to regular income tax. You can avoid paying taxes by continuing to use the funds for qualified medical expenses.
What should I do with my HSA when I retire?
- IRS qualified health care premiums for Medicare Parts B, C, and D,
- Medicare deductibles, co-pays, and co-insurance,
- qualified long-term care insurance premiums,
- dental and vision expenses,
- hearing aids,
Can you inherit an HSA account?
There are no inherited HSA accounts. This means there is no stretch available for HSAs. If your children are in high tax brackets, the requirement of a lump sum distribution means your HSA assets could be gobbled up by taxes.
Can my spouse use my HSA if they are on Medicare?
Yes, being eligible to contribute to the HSA is determined by the status of the HSA account holder not the dependents of the account holder. Your spouse being on Medicare does not disqualify you from continuing contributions to the HSA up to the family limit, even if they are also covered by the HDHP.
When should I stop HSA contributions before Medicare?
There is a six-month lookback period (but not before the month of reaching age 65) when enrolling in Medicare after age 65, so a best practice is for workers to stop contributing to their HSA six months before enrolling in Medicare to avoid penalties.
Can I transfer money from my HSA to my bank account?
Online Transfer – On HSA Bank's Member Website, you can transfer funds from your HSA to an external bank account, such as a personal checking or savings account. There is a daily transfer limit of $2,500 to safeguard against fraudulent activity.
Can you use HSA to pay dental premiums?
HSA - You can use your HSA to pay for eligible health care, dental, and vision expenses for yourself, your spouse, or eligible dependents (children, siblings, parents, and others who are considered an exemption under Section 152 of the tax code).
Can you roll HSA into IRA?
HSA funds can't be rolled over into an IRA account. There's also no reason to do so, because you preserve your right to use the funds tax-free for medical costs at any time with an HSA.
How do I withdraw my HSA tax free?
You can submit a withdrawal request form to receive funds (cash) from your HSA. If the cash is used to pay for ineligible purchases, it must be reported when you're filing your taxes. Once it's reported, it's subject to an income tax and treated as though it had never been in your tax-free HSA.
Can I pay Medicare Part B premiums from my HSA?
After you turn 65, you can use HSA money tax-free to pay premiums for Medicare parts B and D and Medicare Advantage plans (but not premiums for Medicare supplement policies), in addition to paying for other out-of-pocket medical expenses.
Are vitamins covered by HSA?
Generally, weight-loss supplements, nutritional supplements, and vitamins are used for general health and are not qualified HSA expenses.
Can I use my HSA for dental implants?
You can use your Health Savings Account to pay for a wide range of dental treatments. These include teeth cleanings, digital x-rays, fillings, crowns, root canals, dental implants and even bridges. You can even use the money you save for cosmetic work, such as teeth whitening treatments.
Can I buy toothpaste with HSA?
Toothpaste is not eligible for reimbursement with a flexible spending account (FSA), health savings account (HSA), health reimbursement arrangement (HRA), limited-purpose flexible spending account (LPFSA) or a dependent care flexible spending account (DCFSA).
Can I buy groceries with my HSA card?
No, you can't use your Flexible Spending Account (FSA) or Health Savings Account (HSA) for straight food purchases like meat, produce and dairy. But you can use them for some nutrition-related products and services. To review, tax-advantaged accounts have regulatory restrictions on eligible products and services.
When can you withdraw from HSA without penalty?
After you reach age 65 or if you become disabled, you can withdraw HSA funds without penalty but the amounts withdrawn will be taxable as ordinary income.
Can you transfer HSA to 401k?
You cannot roll over HSA funds into a 401(k). You also cannot roll over 401(k) money into an HSA.
Does the IRS monitor HSA accounts?
HSA spending may be subject to IRS audit.
Even if HSA funds were used for qualified medical expenses, the IRS may ask for proof that the funds were spent correctly. Because of this, it is a good idea to save receipts and keep careful records of how HSA funds are spent.
Should I close my HSA account?
You do not have to close your account, and you can continue using the money in your HSA even in retirement. If you no longer have a qualifying high-deductible health plan, you can't make additional contributions. Click here to read our HSAs and Medicare FAQ.
Do I have to report my health savings account on taxes?
Tax reporting is required if you have a Health Savings Account (HSA). You may be required to complete IRS Form 8889. HSA Bank provides you with the information and resources to assist you in completing IRS Form 8889 regarding your HSA.