Can I Use A Health Savings Account To Pay Medicare Premiums?

Dear Liz: I’m 65. Can I usage a wellness savings relationship to salary my Medicare premiums? I do not cod Social Security yet.

Answer: If you already person an HSA, past yes, you tin make tax-free withdrawals from it to salary your Medicare premiums. Once you enroll successful Medicare, though, you won’t beryllium capable to make further contributions to an HSA.

HSAs let group pinch high-deductible wellness security plans to prevention money for existent aliases early aesculapian costs. These accounts connection a uncommon triple taxation advantage: contributions are deductible, nan costs turn taxation deferred and withdrawals are taxation free if nan relationship proprietor has incurred eligible expenses. Since nan costs tin beryllium invested and nan equilibrium rolled complete from twelvemonth to year, galore HSA owners dainty these accounts arsenic a supplemental measurement to prevention for retirement.

It’s important, though, that nan relationship proprietor yet uses these funds. Although a spouse tin inherit an HSA and dainty it arsenic their own, immoderate different beneficiary would look income taxes connected nan balance.

Once you’re 65, you tin retreat HSA money for immoderate logic and not look penalties, but you will beryllium taxed connected nan withdrawals if they don’t meet nan rules for qualified aesculapian expenses.

For example, you tin return tax-free withdrawals to salary premiums for nan various parts of Medicare: Part A (hospital coverage, which is free for astir people), Part B (doctor’s visits), Part C (Medicare Advantage), and Part D (prescription supplier coverage). The premium for a Medicare supplemental policy, though, isn’t considered to beryllium a qualified aesculapian expense, truthful you’d beryllium taxes connected immoderate withdrawal for that.

Premiums for different wellness security policies typically don’t suffice for tax-free withdrawals, pinch a fewer exceptions, specified arsenic paying for COBRA continuation coverage.

Keep successful mind that you tin usage erstwhile years’ aesculapian expenses to warrant a tax-free withdrawal, arsenic agelong arsenic nan unreimbursed disbursal occurred aft opening your HSA. You’ll want to support receipts and different records showing that nan expenses qualified and you haven’t been reimbursed (through an security claim, for example).

Dear Liz: I disagree pinch nan taxation proposal you gave to nan 85-year-old woman and her husband, property 87, who hadn’t revenge a taxation return successful nan past 3 to 5 years. Maybe their mixed income is truthful debased they don’t person to file. Did you see that? If not, you should. Not everyone needs a taxation advisor to adhd 2 Social Security income forms together and find that, “No, hon, we don’t person to file.”

Answer: That was really my first thought. But nan truth that nan writer said her spouse hadn’t “paid” their income taxation successful respective years indicates they whitethorn person owed taxes anterior to that point, and that filing taxation returns had been routine.

Many group successful their 80s don’t person to record national taxation returns because their income is excessively low. For nan 2025 taxation year, singles 65 and complete pinch gross incomes nether $15,750 don’t request to file. The limit is $31,500 if 1 personnel of a joined mates is 65 aliases older and $34,700 if some spouses are 65 aliases older.

But it would beryllium vulnerable and irresponsible to presume that conscionable because personification is older, they nary longer beryllium taxes. The free Tax-Aide work mentioned successful nan erstwhile file tin measure nan couple’s business and supply reassurance if they don’t request to record aliases thief if they do.

Liz Weston, Certified Financial Planner, is simply a individual finance columnist. Questions whitethorn beryllium sent to her astatine 3940 Laurel Canyon, No. 238, Studio City, CA 91604, aliases by utilizing nan “Contact” shape astatine asklizweston.com.