Health Savings Accounts Part 4

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January 12, 2018
Health Savings Accounts Part 4

Image Copyright Ted Grussing Photography – Used with permission

Today we will continue our discussion of HSA’s or Health Savings Accounts. Although, the HSA has some incredible benefits, there are a few stipulations on what it can and cannot be used for.

  • The first thing to note is that you cannot contribute to an HSA if you are enrolled in any Medicare Part.

However, this example may be helpful: In one case, a spouse who was receiving SSA, Medicare Part A could not contribute to an HSA. However, the spouse who was not receiving benefits and participated in the employer’s High Deductible health plan could contribute to the family maximum amount allowable for the company’s HSA.

There are also some infrequent, but beneficial uses of an HSA account to consider.

  • HSA funds cannot be used to pay Medigap premiums, but can be used to pay prescription drug plans, average plan premiums and co-payments.
  • HSAs tax-free income can be used to pay for dental and vision, which Medicare does not pay.
  • As we mentioned last week, you can make a once in a lifetime direct transfer out of your IRA into your HSA of the amount allowed. (DO NOT take your IRA money out and deposit it into your HSA. This money will not qualify. It only works institution to institution—like a direct rollover.)

Remember, if you have access to an HSA, you have access to an account in which your money goes in tax-free, grows tax-free and comes out tax-free when used for medical, dental and vision.

Keep in mind that situations differ and not everyone will qualify for a Heath Savings Account plan. Check with your employer and your tax adviser, or use an online tool or research to learn about your options. You must get with a qualified HSA trustee in order to set up a plan for yourself.

Do not take our word for it. Do your research to see if an HSA is right for you!

Have a great weekend!

Sources:

Publication 969 (2016), Health Savings Accounts and Other Tax-Favored Health Plans. (n.d.). Retrieved from https://www.irs.gov/publications/p969