What is the penalty for contributing to an HSA while on Medicare?
Asked by: Dorthy Ferry | Last update: November 19, 2025Score: 4.1/5 (66 votes)
What happens if I have Medicare and contribute to an HSA?
What are the consequences of contributing funds to my HSA while enrolled in Medicare? Medicare beneficiaries who continue to contribute funds to a HSA may face IRS penalties including payment of back taxes on their tax-free contributions and account interest, excise taxes and additional income taxes.
Do I have to stop HSA contributions 6 months before Medicare?
Because your enrollment date for Medicare (ie, when your coverage starts will generally be 6 months before your application date, you must stop contributing to your HSA 6 months before applying for Medicare.
What happens if I contribute to my HSA after age 65?
If you are not enrolled in Medicare and are otherwise HSA eligible, you can continue to contribute to an HSA after age 65. You are also allowed to contribute the $1,000 catch-up. If you signed up for Medicare Part A and now want to decline it, you can do so by contacting the Social Security Administration.
How can I avoid the HSA penalty?
If you contribute too much money to your HSA during the year or contribute when you are not enrolled in a high-deductible health plan, you may have to pay a tax penalty. You can avoid a penalty on excess contributions by withdrawing them before the tax deadline.
What Is The Penalty For Having An HSA And Medicare? - InsuranceGuide360.com
At what point should I stop contributing to my HSA?
Once you turn 65, you can use the money in your HSA for anything you want. If you don't use it for qualified medical expenses, it counts as income when you file your taxes. Six months before you retire or get Medicare benefits, you must stop contributing to your HSA.
Are HSA withdrawals tax-free after 65?
Can my HSA be used for anything other than qualified health care expenses? One benefit of the HSA is that after you turn age 65, you can withdraw money from your HSA for any reason without incurring a tax penalty. You are, however, subject to normal income tax on any non-qualified withdrawals.
At what age can you no longer have an HSA?
When you turn 65 and begin Medicare coverage, you lose HSA eligibility on the first day of that month. For example, if your birthday is April 19, you are no longer eligible to contribute to an HSA as of April 1.
Can a retiree put money into an HSA?
You can contribute to a health savings account after you retire, so long as you are not enrolled in Medicare. If you are enrolled in Medicare you cannot contribute to a health savings account, but there are other ways of saving for expected and unexpected healthcare costs.
What disqualifies you from contributing to an HSA?
If you can receive benefits before that deductible is met, you aren't an eligible individual. Other employee health plans. An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses can't generally make contributions to an HSA. FSAs and HRAs are discussed later.
What is the 6 month rule for Medicare?
You can sign up for Part A any time after you turn 65. 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.
Can I reimburse myself from HSA for Medicare premiums?
Yes. You can withdraw money from your HSA to reimburse yourself for Medicare premiums that are automatically deducted from your Social Security benefits check. You can withdraw HSA funds at any time to reimburse yourself for eligible expenses you have incurred since you opened the HSA.
When can you take out HSA money without penalty?
The HSA withdrawal rules change a bit when you turn 65. At that point, you can withdraw funds from your HSA without an extra penalty. That's true even if you use the funds for something other than a qualified medical expense.
What is the 6 month rule for Medicare and HSA?
If you have a Health Savings Account (HSA), you and your employer should stop contributing to your HSA 6 months before you retire or apply for benefits from Social Security (or the Railroad Retirement Board). This will ensure you avoid a tax penalty.
Can I use my HSA to pay for dental insurance premiums?
By using untaxed dollars in an HSA to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your out-of-pocket health care costs. HSA funds generally may not be used to pay premiums.
When should I stop contributing to Medicare before HSA?
If you enroll in Medicare after turning 65, your coverage can become effective up to 6 months earlier. You and your employer will need to end your HSA contributions up to 6 months before enrolling in Medicare since Medicare back dates your Part A coverage from the date you enroll.
What happens if you contribute to an HSA while on Medicare?
Enrolling in Medicare when you 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.
Can I still contribute to an HSA after age 65?
If you are not enrolled in Medicare and are otherwise HSA eligible, you can continue to contribute to an HSA after age 65. You are also allowed to contribute the $1,000 catch-up. If you signed up for Medicare Part A and now want to decline it, you can do so by contacting the Social Security Administration.
What is the triple tax benefit of HSA?
HSAs are savings vehicles that offer a triple tax advantage: Contributions go into the HSA tax-free If you make contributions through payroll deductions, they are also not subject to Social Security or Medicare taxes. You can invest that money and enjoy tax-free growth potential.
What is the downside of an HSA?
Drawbacks of HSAs include tax penalties for nonmedical expenses before age 65, and contributions made to the HSA within six months of applying for Social Security benefits may be subject to penalties. HSAs have fewer limitations and more tax advantages than flexible spending accounts (FSAs).
What is the HSA account loophole?
The ultimate loophole available to almost everyone under the age of 65 in our tax code is the Health Savings Account (HSA). It is the only account you can contribute to and deduct the contribution and then withdraw the money tax free. Think about that, a tax deduction going in and no taxes going out.
How to avoid HSA penalty?
Using your HSA in retirement – No penalty
One significant perk of an HSA is that once you reach age 65, you can take an HSA distribution for any expense without penalty. The only caveat is that the withdrawal will be taxed like regular income.
What is the 12 month rule for HSA?
It means you must remain eligible for the HSA until December 31 of the following year. The only exceptions are death or disability. If you violate the testing period requirement, your ineligible contributions become taxable income.
Can you collect social security and still contribute to an HSA?
As discussed above, you can't have Medicare Part A and open or contribute to an HSA. However, you can't opt out of Part A while collecting your Social Security retirement benefits either. If you want to contribute to your HSA, you must delay your Social Security payments so you can decline Medicare Part A.
What happens to HSA on death?
What happens to an HSA at death? Like an IRA account, when a person sets up an HSA, they name a beneficiary. If the beneficiary is a surviving spouse, the unused portion of the decedent's HSA passes directly to the spouse and becomes his or her HSA; there is no tax liability.