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.
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.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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.
-
Take Charge of Retirement Spending With This Simple StrategyTo make sure you're in control of retirement spending, rather than the other way around, allocate funds to just three purposes: income, protection and legacy.
-
Here's How To Get Organized And Work For YourselfWhether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
-
Credit Report Error? They All Mattercredit & debt Don't dismiss a minor error. It could be the sign of something more serious.
-
Insurance for a Learning Driverinsurance Adding a teen driver to your plan will raise premiums, but there are things you can do to help reduce them.
-
Getting Out of an RMD Penalty
retirement When your brokerage firm miscalculates your required minimum distributions, you have recourse.
-
529 Plans Aren’t Just for Kids529 Plans You don’t have to be college-age to use the money tax-free, but there are stipulations.
-
When to Transfer Ownership of a Custodial Accountsavings Before your child turns 18, you should check with your broker about the account's age of majority and termination.
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
-
When It Pays to Buy Travel Insurance
Travel Investing in travel insurance can help recover some costs when your vacation gets ruined by a natural disaster, medical emergency or other catastrophe.
-
It’s Not Too Late to Boost Retirement Savings for 2018
retirement Some retirement accounts will accept contributions for 2018 up until the April tax deadline.
