Advertisement
IRAs

Tap an IRA Tax-Free With an HSA Rollover

You can convert tax-deferred money in a traditional IRA into tax-free cash by rolling it over to a health savings account and using it to pay for medical bills.

Question: I’m going to have knee surgery in a few months, and I’d like to roll over money from my traditional IRA to my health savings account, so I can take the withdrawal tax-free. How much can I roll over, and what are the rules?

Answer: You can make a one-time rollover from your IRA to the health savings account, as long as you have an HSA-eligible health insurance policy. You can roll over up to your HSA contribution limit for the year, minus any contributions you’ve already made. That means you can contribute or roll over up to $3,500 in 2019 if you have single health insurance coverage, or up to $7,000 if you have family coverage. If you’re 55 or older, you can contribute or roll over an extra $1,000.

Rolling over money from a traditional IRA to an HSA changes it from tax-deferred to tax-free, if you use the HSA money for eligible medical expenses. You can only make an IRA-to-HSA rollover once in your lifetime. And you must transfer the money directly from the IRA to the HSA for the transfer to be tax-free. Ask your HSA administrator for its procedure.

Advertisement - Article continues below

To qualify as an HSA-eligible policy in 2019, the insurance must have a deductible of at least $1,350 for single coverage or $2,700 for family coverage. See Health Savings Account Limits for 2019 for more information about the requirements for an HSA-eligible policy.

Advertisement
Advertisement - Article continues below

Rather than doing a rollover, it’s better to make new contributions to the HSA instead, if you can afford it. That way, you can benefit from the tax-deductible contribution to the HSA this year and also withdraw the money tax-free from it, while keeping the other money growing tax-deferred in your IRA.

Advertisement

Most Popular

What Are the Income Tax Brackets for 2020 vs. 2019?
tax brackets

What Are the Income Tax Brackets for 2020 vs. 2019?

The IRS unveiled the 2020 tax brackets, and it's never too early to start planning to minimize your future tax bill.
June 20, 2020
HSAs Get Even Better
Financial Planning

HSAs Get Even Better

Workers have more options with flexible spending accounts, too.
July 2, 2020
17 States That Will Gain or Lose Electoral-College Votes After the 2020 Census
Politics

17 States That Will Gain or Lose Electoral-College Votes After the 2020 Census

Every 10 years, the 435 seats in the House of Representatives are reassigned based on the results of the U.S.
July 2, 2020

Recommended

Where Should You Retire?
retirement planning

Where Should You Retire?

This week, our Your Money's Worth podcast host Ryan Ermey interviews co-host Sandy Block about her recent story about the best retirement destinations…
July 7, 2020
How to Get an Extension for Filing Your Tax Return
tax deadline

How to Get an Extension for Filing Your Tax Return

If you can't wrap up your tax return by the July 15 deadline, it's easy to buy yourself more time.
July 7, 2020
Tax Tips for Last-Minute Filing
tax deadline

Tax Tips for Last-Minute Filing

As you rush to meet the July 15 tax filing deadline, here are some pointers to bring your stress level down.
July 7, 2020
HSAs Get Even Better
Financial Planning

HSAs Get Even Better

Workers have more options with flexible spending accounts, too.
July 2, 2020