Health Savings Accounts - Learn More

Eligibility for a Health Savings Account (HSA)

An eligible individual is someone who is:

• covered under a High-Deductible Health Plan (HDHP)* on the first day of the month for which a contribution is made;
• not covered by another health plan that is not a HDHP;
• not enrolled in Medicare;
• not eligible to be claimed as a dependent on another individual's federal income tax return.

Contribution Limits

The maximum annual contribution amount is the lesser of 100% of the annual deductible under the HDHP, subject to cost-of-living adjustments (COLAs) or the standard limit.

A 'catch-up' contribution is available for eligible individuals who have attained age 55 by the end of their taxable year, but have not attained age 65.

Contributions

Contributions to a HSA are fully deductible, the earnings grow tax deferred, and distributions for qualified medical expenses are tax-free.

If you meet the eligibility requirements for a HSA, you, your employer, or your family members may contribute to your HSA. Self-employed individuals can contribute to a HSA and are often ideal candidates for a HSA.

Contributions made by you, or by family members on your behalf, are deductible by you when determining your adjusted gross income for your federal income tax return. Contributions made by an employer on your behalf are not included in your income, and are not deductible on your federal income tax return.

Distributions

Distributions from your HSA used to pay qualified medical expenses for you, your spouse, or your dependants are excluded from gross income. Any other distributions are included in your gross income and are subject to an additional 10% tax on that amount, except in the case of your death, disability, or attaining age 65.

HSA custodians/trustees are not required to determine whether HSA distributions are used for qualified medical expenses.

Qualified medical expenses may include:

• actual medical expenses, including doctor visits, prescriptions, transportation to obtain medical care, and dental care;
• qualified long-term care insurance;
• healthcare coverage when employed;
• qualified continuation-of-benefit health coverage;
• certain health insurance after age 65.

Upon death, any balance remaining in the HSA becomes the property of the individual named in the HSA agreement as the beneficiary of the account. If your spouse is the beneficiary of your HSA, the HSA becomes his/her HSA.

If your beneficiary is not your spouse, the HSA ceases to be an HSA as of the date of your death and will be included in the beneficiary’s gross income for the year of death.

*A HDHP is a plan with an annual deductible of at least $1,000 for individual coverage or $2,000 for family coverage. The HDHP must also limit out-of-pocket expenses.

NOTE: If you require assistance in determining your qualified contributions and medical expenses, please consult with your tax professional.