A Health Savings Account (H.S.A.) is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. For 2024, if you have an HDHP, you can contribute up to $4,150 for self-only coverage and up to $8,300 for family coverage into a Self-Directed H.S.A account.
To have a Health Savings Account you need to have a High-Deductible Health Plan (HDHP). In an HDHP, you typically pay more money out of pocket before your insurance kicks in, making upfront costs higher. You will pay a penalty for non-qualified medical expenses.
For many people, health savings accounts (H.S.A.s) offer a tax-friendly way to pay medical bills. You can deduct your contributions to an H.S.A. (even if you do not itemize), HSA contributions are excluded from gross income, earnings are tax free, and distributions are not taxed if you use them to pay qualified medical expenses. Plus, you can hold on to the account past your working years and use it tax-free for medical expenses in retirement. Overall, H.S.A. accounts can be a great tool for covering your health care costs while also saving for your future.
Health Savings Accounts can also be a great tool for self-directed investing. Because contributions are tax-deductible (like a Traditional IRA) and because distributions can be tax-free (like a Roth IRA) you can grow your alternative asset investing in a tax-free way. Once you reach the age of 65 you can withdraw the funds without penalty and use your savings for anything you like.
Contribution Limits
In Revenue Procedure 2020-32, the IRS confirmed H.S.A. contribution limits effective for calendar year 2021, along with minimum deductible and maximum out-of-pocket expenses for the HDHPs with which Self-Directed HSA accounts are paired.
2023
| Single Plan | Family Plan | |
| Max Contribution Limit | $4,150 | $8,300 |
| Minimum Deductible | $1,600 | $2,800 |
| Catch-up Contribution (55+) | $1,000 | $1,000 |
H.S.A. investment money is yours to keep. Unlike a flexible spending account (FSA), unused money in your H.S.A. account is not forfeited at the end of the year; it continues to grow, tax deferred. Your H.S.A. belongs to you, not your employer, just like your personal checking account.
You can invest the funds in your Self-Directed H.S.A. account and that is where the Self-Directed part comes in. uDirect IRA Services helps you invest these funds into alternative assets of your choice.
You can make annual HSA contributions and you can move funds from an IRA to an H.S.A. This transfer can happen only if you are eligible to make contributions to your H.S.A. In other words, you need to do the transfer while you are covered by a high-deductible health plan and otherwise eligible to have an H.S.A. You can only roll funds from an IRA to a Self-Directed H.S.A. account once during your lifetime.
You can withdraw funds from your H.S.A. account at any time. But remember that if you use your H.S.A. investment funds for any reason other than to pay for a qualified medical expense, those funds will be taxed as ordinary income, and the IRS will impose a 20% penalty. As always, check with your competent tax professional.
To set up your Self-Directed H.S.A account, or get your pressing questions answered, contact us at (866) 919-1219 or info@uDirectIRA.com. If you’re ready to get started, you can set up your account HERE.
