IRA to HSA tax free

[GrayHare]

Anybody done this? AFAIK, each eligible person can do such a transfer one time only. Since it's subject to the HSA annual contrib limit I don't know if such a transfer is worth the gotchas that might be waiting.

 

[gauss]

I have known it was there but have held off on doing it. I fund both the IRA contributions and the HSA contributions to the max each year. This would limit my ability to move after-tax money into the tax preferenced accounts.

Will be interesting to see if a more sophisticated approach to this is discussed here.

Perhaps if they don't disallow the transfer once a person is on Medicare then it may be of interest since normal HSA contributions are no longer allowed once a person is on Medicare.

-gauss

 

[mn54]

the disadvantage to doing this is that you lose the tax deduction for the HSA contribution.

 

[thefinancebuff]

Useless. Capped by the HSA contribution limit. Lose the HSA deduction.

 

[RunningBum]

I can't come up with an advantage to this for me, with no earned income. The only way for me to get money into my Roth now is to convert from my tIRA, and I do this up to my ACA subsidy limit or the top of the 15% bracket. Taking the HSA deduction gives $4350 more I can convert, so it's better to use money outside my IRA for HSA contributions to maximize my Roth conversions + HSA contributions.

 

[GrayHare]

the disadvantage to doing this is that you lose the tax deduction for the HSA contribution.

I didn't know that, yes, that's a gotcha.

 

[Svensk Anga]

Its not totally useless. If one did not have the after tax funds available to contribute to the HSA one year, one could do the IRA to HSA transfer. The benefit is that the transferred funds and all earnings thereon could eventually come out tax-free, provided they are used for medical expenses. If you have a tight year early on, do this, and can let it compound for a few decades, it could be worth something.

 

[Mulligan]

I converted my IRA to an HSA. It was stranded money from long ago. I realized I would retire eventually with a pension in a higher tax bracket than what I was making at that time. So I moved the money just to close out the account.

 

[audreyh1]

Useless. Capped by the HSA contribution limit. Lose the HSA deduction.

I think this would be for someone who really didn't have the ready money to fund their HSA, but did have savings in an IRA that they otherwise couldn't easily access in the near term to pay medical expenses.

Different folks than the typical ones here.

 

[gauss]

I have known it was there but have held off on doing it. I fund both the IRA contributions and the HSA contributions to the max each year. This would limit my ability to move after-tax money into the tax preferenced accounts.

Will be interesting to see if a more sophisticated approach to this is discussed here.

Perhaps if they don't disallow the transfer once a person is on Medicare then it may be of interest since normal HSA contributions are no longer allowed once a person is on Medicare.

-gauss

Updating my post from above:

After reading the instructions for form 8889 and Pub 969 I can see that a qualified transfer from an IRA to HSA once you are on Medicare would not be allowed.

-gauss

 

[ziggy29]

Updating my post from above:

After reading the instructions for form 8889 and Pub 969 I can see that a qualified transfer from an IRA to HSA once you are on Medicare would not be allowed.

Not surprising, since HSA contributions are only allowed for folks under 65, and Medicare participants are not eligible to contribute to one.

 

[bingybear]

Updating my post from above:

After reading the instructions for form 8889 and Pub 969 I can see that a qualified transfer from an IRA to HSA once you are on Medicare would not be allowed.

-gauss

Not to get too political, but the rhetoric indicates that there are many changes planned. Too early to make plans and too much discussion might get the thread closed. For now plan for the current laws while realizing change is likely in the future.

 

[MBSC]

Not surprising, since HSA contributions are only allowed for folks under 65, and Medicare participants are not eligible to contribute to one.

A 65+ year old employee not enrolled in Medicare Part A and enrolled in the large employer's HSA eligible HDHP can contribute to an HSA. It is the Part A enrollment, not age, that prohibits HSA contributions.