Table of Contents
Your contributions after you’re enrolled in Medicare might be considered “excess” by the IRS. Excess contributions will be taxed an additional 6 percent when you withdraw them. You’ll pay back taxes plus an additional 10 percent tax if you enroll in Medicare during your HSA testing period.
What happens if you contribute to an HSA while on Medicare?
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. If you use the account for qualified medical expenses, its funds will continue to be tax-free.
Can I contribute to an HSA in the year I turn 65?
You can make an HSA contribution after you turn 65 and enroll in Medicare, if you have not maximized your contribution for your last year of HSA eligibility. You can do so even if you are no longer eligible for an HSA so long as you are making a contribution for a period when you were eligible.
Can seniors on Medicare have an HSA?
The bill allows working seniors to enroll in Medicare and still be HSA eligible on their employer-sponsored, HSA-qualified health plan coverage. It appears every Friday, exclusively on the HSA Learning Center.
Can you contribute to an HSA if you receive Social Security?
If you have applied for or are receiving Social Security benefits, which automatically entitle you to Part A, you cannot continue to contribute to your HSA.
How do I avoid HSA penalty?
If you can show “clear and convincing” evidence that a non-qualified expense was made by mistake, you are allowed to return the money to your HSA account and avoid the penalty. For example, suppose you assumed a certain healthcare product or medical procedure was qualified and later discovered that it wasn’t.
When should you stop contributing to HSA?
Under IRS rules, that leaves you liable to pay six months’ of tax penalties on your HSA. To avoid the penalties, you need to stop contributing to your account six months before you apply for Social Security retirement benefits. Patricia Barry is a senior editor at the AARP Bulletin.
What can I use my HSA funds for after age 65?
How do I withdraw my HSA funds after age 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 happens to unused HSA funds after death?
If you don’t designate a beneficiary, your HSA funds will be distributed to your estate. Your gross income for that year will be included in the fair market value of the account. Estate taxes will also be reduced by the same amount.
Are you automatically enrolled in Medicare when you turn 65?
Yes. If you are receiving Social Security, the Social Security Administration will automatically sign you up at age 65 for parts A and B of Medicare. Social Security will send you sign-up instructions at the beginning of your initial enrollment period, three months before the month of your 65th birthday.
Can I use my spouse’s HSA if I am on Medicare?
If you’re enrolled in Medicare and have existing HSA funds, you can also use your HSA funds to pay for your Medicare premiums. And you can use your HSA funds to pay for eligible expenses for your spouse, even though he/she isn’t HSA-eligible. However, you can’t pay for your spouse’s Medicare premiums until you turn 65.
Does HSA reduce Social Security tax?
Health Savings Accounts You still must pay Social Security taxes on HSA contributions, with the exception of Section 125 “cafeteria” plans, which allow employees to pay insurance premiums pretax and can also be modified to allow HSA contributions. These plans are free of both income and Social Security taxes.
Do HSA accounts get audited?
HSA account holders are responsible for reporting their own distributions to the IRS through Tax Form 8889. It’s recommended that HSA owners keep records of all their distributions, in the event, they ever become audited by the IRS.
Are HSA good for retirees?
They can be invested like the rest of your retirement portfolio and earn the same returns. After you retire, it’s time to start taking money from the HSA. Of course you can use the HSA to pay qualified medical expenses during retirement. These can include insurance premiums, including Medicare premiums.
Can you have a beneficiary on an HSA account?
Designating a beneficiary is important to ensure that the funds in your HSA will easily transfer to your loved ones when you’re gone. You can choose one beneficiary or, choose multiple and assign percentages to each. Plus, you can change your beneficiary at any time.
Can I name a charity as the beneficiary of my HSA?
You can name a qualified charity as a beneficiary. Any entity other than the deceased’s spouse or estate can be chosen. Like we mentioned above, in this situation the HSA would be dissolved, and the money given to the charity after being taxed.
Can you get Medicare Part B for free?
While Medicare Part A – which covers hospital care – is free for most enrollees, Part B – which covers doctor visits, diagnostics, and preventive care – charges participants a premium. Those premiums are a burden for many seniors, but here’s how you can pay less for them.
Do you have to contact Social Security when you turn 65?
Is it automatic when I turn 65? To enroll in Medicare, most people need to contact Social Security directly. Do this before your 65th birthday to avoid a lapse in health coverage. You can enroll online, at your local Social Security office, or by calling (800) 772-1213 (TTY 1-800-325-0778).
Are you automatically enrolled in Medicare Part B?
Medicare will enroll you in Part B automatically. Your Medicare card will be mailed to you about 3 months before your 65th birthday. If you’re not getting disability benefits and Medicare when you turn 65, you’ll need to call or visit your local Social Security office, or call Social Security at 1-800-772-1213.
