Is contributions to an HSA account deductible if you health insurance is Medicaid?

[Critter-3 · Accepted solution]

NO ... they are expressly forbidden.  

[RJG0307]

Thank you for your assistance 🙂

[RJG0307]

What about if you health insurance in Medicare?

Can you still make contributions?

[TomD8]

@RJG0307 

IRS rules say that you can't contribute to an HSA if you're enrolled in Medicare.

[RJG0307]

But I still make contributions just to pay medical bills?

Please advise and thanks.

[Critter-3]

NO ... once you are on Medicare you can no longer have a HDP and therefore you cannot make new CONTRIBUTIONS   to an HSA account  period ... that is the law.     

You can, however,  continue to take DISTRIBUTIONS  from an already established HSA account until it is depleted.  

[RJG0307]

Thank you Critter, I was having trouble finding the information.  The reason I asked this is because I will be eligible for Medicare soon, but I am currently on Medicaid.  And I am assuming that I cannot make contributions to an existing HSA being on Medicaid as well.  So since I have made a couple of distributions to my existing HSA, should I just take back the contributions and return them to the account I took them from?   The last thing I want is to break the law.  My apologies for not being up to date on this.  Your assistance is very much appreciated.  The last thing I want to do is break the law.

Please advise and thanks. 

[Opus 17]

@RJG0307 

If you made HSA contributions during 2021 but you are not eligible, because you have other health coverage that disqualifies you, Those are considered “excess contributions.”  If you leave the excess contributions in the account, you will not be allowed a tax deduction and you will pay a 6% penalty.  You need to contact the HSA bank and request a return of excess contributions. This is not a normal distribution, and probably requires you to file a separate form with the bank.

You can continue to spend money in an HSA for medical expenses for yourself, your spouse, and your dependents, no matter what kind of insurance coverage you have. But you can’t make new contributions when you are disqualified.