Can I contribute to an HSA once I have Medicare?

Why can't I contribute to an HSA once I have Medicare?

Because the tax rules for HSAs require that you not be enrolled in Medicare. IRS Publication 969 lists the conditions for making HSA contributions: you're covered by a high deductible health plan on the first day of the month, you have no other health coverage except what the rules permit, you aren't enrolled in Medicare, and no one can claim you as a dependent. Beginning with the first month you're enrolled in Medicare, your contribution limit is zero.

Part A alone is enough to end contributions. Medicare.gov says you're not eligible to make contributions to your HSA after you have Medicare, and that if your Part A coverage overlaps months when you made contributions, you may have to pay a tax penalty. Contributions from your employer count too: the IRS includes contributions by you, your employer and anyone else in the yearly total.

Why does Medicare.gov say to stop contributions 6 months early?

Because premium-free Part A can be backdated. If you're 65 or older, Medicare.gov says your Part A coverage will start up to 6 months back from the date you sign up for Medicare or apply for benefits from Social Security (or the Railroad Retirement Board), but no earlier than the month you turned 65. The IRS says the zero contribution limit applies to those retroactive months as well, so HSA contributions made during them count as excess contributions.

The Medicare & You 2027 handbook suggests making your last HSA contribution the month before your Part A coverage begins, and notes that the retroactive period may be different depending on how you become eligible for Part A. Two rows of its chart cover waiting to sign up until after you turn 65:

• You sign up for Medicare 6 or more months after you turn 65: stop HSA contributions 6 months before the month you apply for Medicare.
• You sign up less than 6 months after you turn 65: stop HSA contributions the month before you turn 65.

What happens if I contributed after my Medicare started?

Contributions above your limit are excess contributions under IRS rules. Excess contributions aren't deductible, excess contributions your employer made are included in your gross income, and you generally pay a 6% excise tax on the excess for each tax year it stays in the account. You may be able to avoid the excise tax by withdrawing the excess by the due date of your tax return, including extensions; IRS Publication 969 lists the conditions.

Does starting Social Security end my HSA contributions?

Usually, yes, because Social Security benefits come with Part A. Medicare.gov says that once you're approved for Social Security (or Railroad Retirement Board) benefits, you automatically get Medicare Part A once you're eligible for Medicare, and people who start Social Security at least 4 months before turning 65 get Medicare automatically at 65. That's why Medicare.gov says to stop HSA contributions 6 months before you retire or apply for Social Security benefits, not only before you apply for Medicare. See how Medicare and Social Security work together.

Can I still use my HSA money after Medicare starts?

Yes. Medicare.gov says you can withdraw money from your HSA after your Medicare coverage starts to help pay your share of costs, like deductibles, premiums, coinsurance or copayments. Under IRS rules, contributions stay in the account until you use them, unused money carries over from year to year, and withdrawals used for qualified medical expenses are tax-free.

Insurance premiums are generally not qualified medical expenses, but the IRS makes exceptions, including premiums for Medicare and other health care coverage if you're 65 or older. Premiums for a Medicare supplemental policy, such as Medigap, are not qualified medical expenses. Money you take out for anything else is taxable income; the additional 20% tax on those withdrawals doesn't apply after you reach 65.

Can I delay Medicare so I can keep contributing?

Sometimes. If you have premium-free Part A, Medicare.gov says you can choose to sign up when you turn 65 or anytime later. If you or your spouse are still working and covered by that employer's group health plan, you may be able to wait to sign up for Part B without a late enrollment penalty, and you get an 8-month Special Enrollment Period once the job or the coverage ends. Medicare.gov says an HSA with a high deductible health plan based on your or your spouse's current employment may make you eligible for that Special Enrollment Period. See delaying Medicare while you're still working.