Can I contribute IRA or SS income to an HSA for tax year 2017 if going on Medicare August 1, 2018?

[metoa]

My wife is 63 and I am 64 1/2 years old.  My 2017 income sources were my IRA AND SS.  We are enrolled in a high deductible plan.  I wish to fund my HSA before April 15, 2018 for the '17 tax year.  I know there is a once in a lifetime opportunity to use IRA funds for contribution to an HSA.  I will be going on Medicare in August, 2018.  Can I make a tax deductible HSA contribution for tax year '17?  I want to contribute $4,000.  If I can do this, is the $$ considered to be coming from my SS income or my IRA?  In other words, will I be using this once-in-a-lifetime IRA to HSA (and does this have to be a direct electronic "roll-over") or can I use $$ from the SS income to make this tax deductible contribution?  Thank you!

[BMcCalpin · Accepted solution]

First, if you had valid HDHP coverage in 2017 (it sounds like you did), you can still make a contribution under the 2017 HSA contribution limit until April 17, 2018. (but see the note at the bottom)

Note that when you go on Medicare, the SSA often back dates Part A by 6 months, making you ineligible in February 2018 - but that's only ineligible to contribute against the 2018 limit. You are still OK to contribute to 2017 limit as long as you make it before the due date of the return.

The once in a lifetime IRA to HSA rollover can be either trustee-to-trustee or by check mailed to you but made out to the new HSA administrator. But, in practice, since this kind of rollover counts against the same HSA contribution limit as a regular contribution, if you already have the money (it doesn't matter what the source is), for simplicity's sake (and because of the coming deadline), I would just send a check to the HSA administrator. Make sure you don't exceed the annual limit between this and previous contributions.

NOTE: you must tell the HSA administrator that the contribution is for 2017, otherwise, they will apply it to 2018 by default.

If you don't have the money yet to send, you have three weeks to see if you can get the IRA to HSA transfer done - call the IRS administrator and see if they can make it happen, either trustee to trustee or mailing you the check made out to the HSA. Note that if you think you will run afoul of the April 17, 2018 deadline, extend your return (file form 4868), because this would allow you to make the rollover as late as October 15, 2018. Of course, you will still be able to file your return at any time.

SECOND NOTE: if you do the IRA to HSA transfer, remember to emphasize to the IRA administrator to tell the HSA administrator that this rollover is for 2017. Get this in writing and save it in your tax file.