Do HSA Contributions Have to Come from Earned Income?

Health Savings Accounts (HSAs) are a valuable tool for saving money on medical expenses while enjoying tax benefits. One common question that arises is whether HSA contributions have to come from earned income. The answer to this question is crucial for those considering opening an HSA or contributing to an existing one.

Income from various sources can be used to contribute to an HSA, and it does not necessarily have to be earned income. This flexibility allows individuals to save for healthcare expenses regardless of their employment status. Here’s a breakdown of the sources of income that can be used for HSA contributions:

• Earned Income: Salaries, wages, bonuses, and self-employment income are considered earned income and can be used for HSA contributions.
• Unearned Income: Income from sources such as investments, rental properties, alimony, and retirement benefits can also be used for HSA contributions.

It's important to note that the total contributions to an HSA in a year should not exceed the annual contribution limit set by the IRS. For 2021, the contribution limit for individuals is $3,600, and for families, it is $7,200.

Understanding the rules around HSA contributions can help individuals make the most of this tax-advantaged savings opportunity. Whether the income is earned or unearned, contributing to an HSA can provide financial security and peace of mind when it comes to managing healthcare costs.

Your Health Savings Account (HSA) serves as a fantastic tax-efficient tool for covering your healthcare expenses, and many wonder if HSA contributions strictly need to come from earned income. The straightforward answer is yes—contributions to an HSA must be funded by earned income. In essence, active employment or self-employment is necessary to make contributions.