Ask Kim


Jump-Starting a Health Savings Account With an IRA Rollover

[Question]How much money can I roll over from my IRA to a health savings account? Also, are contributions from a rollover tax-deductible?

[Answer]You can make one rollover from an IRA to a health savings account in your lifetime, which can be a good way to jump-start your HSA if you don't have new money to save. But you can only make a rollover if you're eligible to make new HSA contributions that year. In 2018, you need an HSA-eligible health insurance policy with a deductible of at least $1,350 for single coverage or $2,700 for family coverage. The amount you can roll over is limited to your maximum HSA contribution for the year. That's $3,450 for single coverage or $6,900 for family coverage in 2018, plus $1,000 if you're 55 or older - minus any contributions you've already made for the year.

SEE ALSO: 10 Things You Need to Know About HSAs

You'll be able to use the money tax-free for eligible medical expenses, rather than having to pay taxes (and a 10% penalty if you're under age 59½) if you withdraw the money from the IRA. The rollover must be made directly from the IRA administrator to the HSA administrator for it to be tax-free; you can't withdraw the money from the IRA yourself first.

You bring up a good point about the tax deduction. You can deduct direct contributions to an HSA, but you can't deduct contributions that you roll over from an IRA to an HSA. So if you can afford to make your HSA contribution with other money, you'll benefit from the extra tax break.

For more information about the rollover rules, see the "Qualified HSA funding distribution" section of IRS Publication 969, Health Savings Accounts. For more information about HSAs, see our FAQs About Health Savings Accounts.

SEE ALSO: 50 Ways to Save on Health Care


Copyright 2018 The Kiplinger Washington Editors

More from

See more stories in this category

Back to Previous Page

Ask Kim

Health Insurance Options When Leaving a Job

[Question]I'm thinking about leaving my job and starting my own business, but I'll lose my health...

New Limit for Health Savings Account Contributions

[QUESTION]I just saw that the 2018 HSA contribution limit for people with family coverage was reduced...

Lottery Winnings' Impact on Social Security

[QUESTION]If I win the Powerball jackpot, will that affect my Social Security benefits? I'm 63, so I'm...

What's the Penalty for Canceling a Rewards...

[Question]If I get a rewards credit card that waives the annual fee for the first year and cancel the...

Insurance for Home Sharers

[Question]I'm thinking about renting out my house through a home-sharing service while I'm away for a...

Next Page >
Provided by Kiplinger