Understanding Tax Penalties for HSA and Medicare Under Age 65

Are you considering a Health Savings Account (HSA) and enrolled in Medicare, all under the age of 65? It's crucial to understand the tax implications that may arise in this scenario.

Generally, once you enroll in Medicare, you are no longer eligible to contribute to an HSA. If you continue contributing to your HSA while on Medicare, you may incur tax penalties.

Under IRS rules, if you have both an HSA and Medicare coverage and are under 65, here are the main tax penalties you need to be aware of:

• 1. Non-Qualified Withdrawals: If you use HSA funds for non-medical expenses while on Medicare before the age of 65, the withdrawal will be subject to income tax plus a 20% penalty.
• 2. Excess Contributions: If you contribute to your HSA while enrolled in Medicare, those contributions will be considered excess and are subject to a 6% excise tax each year until corrected.
• 3. Medicare Part A Penalty: If you delay enrolling in Medicare Part A while contributing to an HSA, you may face premium surcharges once you do enroll.

It's essential to stay informed about the rules and regulations governing HSAs and Medicare to avoid unnecessary tax penalties. If you have any doubts or questions, consult a tax professional or financial advisor to ensure you are making informed decisions.

Did you know that if you're under 65 and enrolled in Medicare, you could face tax penalties for using your Health Savings Account (HSA)? It's important to be informed about how your Medicare coverage impacts your HSA contributions.