FAQs: reporting HSA contributions and distributions

The prevalence of high deductible health plans (HDHPs) and health savings accounts (HSAs) is steadily increasing. Whether provided by employers or obtained independently, taxpayers must grasp the concept of HDHPs and the eligibility criteria for contributing to an HSA. This is where you come in to help your clients.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you’ll have access to the full recording and the entire list of Q&As.   

Q: Can HSA distributions be used to reimburse medical expenses from prior years? A: Yes. There’s no time limit for reimbursing qualified medical expenses. However, the expenses must have been incurred after the HSA was established.

Q: Should clients who are turning 65 try to use all their HSA money before going on Medicare?
A: No. They can still keep the HSA and take tax-free distributions for qualified medical expenses (including Medicare premiums), even if they’re enrolled in Medicare and are no longer eligible to make HSA contributions.

Q: Does the maximum contribution to an HSA include the total employer and employee contributions, or can each of them contribute the maximum amount?
A: Employer and employee contributions in total cannot exceed the maximum contribution amount. In other words, you must reduce the amount you contribute to your HSA by any employer contributions made to your HSA that were excluded from your income.

Q: There is no income limit to be able to contribute to an HSA, correct?
A: Yes, that’s correct. There’s no income limit to be eligible to make HSA contributions.

To learn more about the tax implications of reporting HSA contributions and distributions, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at go.natptax.com/explore.