Do Contributions to an HSA Have to be Made from Earned Income?

Health Savings Accounts (HSAs) are a popular way for individuals to save for medical expenses while enjoying tax benefits. One common question that often arises is whether contributions to an HSA have to be made from earned income.

The answer is yes, contributions to an HSA must be made from earned income. This includes income from wages, salaries, bonuses, commissions, and self-employment income. It does not include income from sources such as gifts, inheritances, or investment earnings.

When contributing to an HSA, it is important to keep in mind that there are annual contribution limits set by the IRS. For 2021, the contribution limit for an individual is $3,600, and for a family, it is $7,200. Individuals who are 55 or older can make an additional catch-up contribution of $1,000.

Contributing to an HSA with pre-tax dollars can help individuals reduce their taxable income and save money on taxes. Any contributions made to an HSA are tax-deductible, and the funds in the account can be used to pay for qualified medical expenses tax-free.

Health Savings Accounts (HSAs) offer a fantastic way for individuals to set aside money specifically for healthcare expenses, all while reaping significant tax advantages. A common inquiry that many people have is whether the money contributed to an HSA must come from earned income, like a paycheck or self-employment income.