Personal HSAs

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Below are answers to some common questions about Health Savings Accounts based on information from the IRS.  For more detailed information regarding HSAs, please visit the IRS by clicking here.

What is a Health Savings Account?
A health savings account (HSA) is a tax-exempt trust or custodial account that you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA.
Am I Eligible for an HSA?

To be an eligible individual and qualify for an HSA, you must meet the following requirements:

  • You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month. 
  • You have no other health coverage except what is permitted under Other health coverage , later. 
  • You are not enrolled in Medicare. 
  • You cannot be claimed as a dependent on someone else's 2013 tax return.
What is an HDHP?

An HDHP has: 

  • A higher annual deductible than typical health plans, and 
  • A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. Out-of-pocket expenses include copayments and other amounts, but do not include premiums.

An HDHP may provide preventive care benefits without a deductible or with a deductible below the minimum annual deductible.

HDHP Annual Deductible

HDHP Annual Deductible
Tax Year Self-Only Coverage Family Coverage
2013 $1,250 $2,500
2014 or later $1,250* $2,500*
*Subject to annual cost-of-living adjustments.
Are There Other Requirements for the HDHP?
Yes. For HSA purposes, the HDHP must limit out-of-pocket expenses to no more than the amounts shown in the chart that follows.
Maximum Out-of-Pocket Expenses
Tax Year Self-Only Coverage Family Coverage
2013 $6,250 $12,500
2014 and later $6,250* $12,500*
* Subject to annual cost-of-living adjustments.
Who Can Contribute to My HSA?

Any eligible individual can contribute to an HSA. For an employee's HSA, the employee, the employee's employer, or both may contribute to the employee's HSA in the same year. For an HSA established by a self-employed (or unemployed) individual, the individual can contribute. Family members or any other person may also make contributions on behalf of an eligible individual.

Contributions to an HSA must be made in cash. Contributions of stock or property are not allowed.

How Much Can I Contribute to My HSA?

For 2013, if you have self-only HDHP coverage, you can contribute up to $3,250. If you have family HDHP coverage you can contribute up to $6,450.

If you are, or were, considered (under the last-month rule, discussed later), an eligible individual for the entire year and did not change your type of coverage, you can contribute the full amount based on your type of coverage. However, if you were not an eligible individual for the entire year or changed your coverage during the year, your contribution limit is the greater of:

  1. The limitation shown on the last line of the Line 3 Limitation Chart and Worksheet in the Instructions for Form 8889, Health Savings Accounts (HSAs), or 
  2. The maximum annual HSA contribution based on your HDHP coverage (self-only or family) on the first day of the last month of your tax year.

Additionally, "catch-up" contributions are available for eligible individuals who are age 55 or older by the end of their taxable year and for any months individuals are not enrolled in Medicare.

Contribution Limits
  Standard Limit  
Tax Year Self-Only Coverage Family Catch-Up
Contribution Limit
2013 $3,250 $6,450 $1,000
2014 and later $3,250* $6,450* $1,000
* Subject to annual cost-of-living adjustments.
May I Claim a Federal Tax Deduction for My HSA Contribution?

Contributions made by your employer are not included in your income. Contributions to an employee's account by an employer using the amount of an employee's salary reduction through a cafeteria plan are treated as employer contributions. Generally, you can claim contributions you made and contributions made by any other person, other than your employer, on your behalf, as an adjustment to income.

Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. The contributions are treated as a distribution of money and are not included in the partner's gross income. Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are deductible by the partnership and includible in the partner's gross income. In both situations, the partner can deduct the contribution made to the partner's HSA.

Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are deductible by the S corporation and includible in the shareholder-employee's gross income. The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA.

What Happens to My HSA in the Event of My Death?

You should choose a beneficiary when you set up your HSA. What happens to that HSA when you die depends on whom you designate as the beneficiary.

Spouse is the designated beneficiary.
If your spouse is the designated beneficiary of your HSA, it will be treated as your spouse's HSA after your death.

Spouse is not the designated beneficiary.
If your spouse is not the designated beneficiary of your HSA:

  • The account stops being an HSA, and 
  • The fair market value of the HSA becomes taxable to the beneficiary in the year in which you die.

If your estate is the beneficiary, the value is included on your final income tax return.