Can You Rollover an Existing IRA Into an HSA?

by Mark Kennan, studioD

You can't roll over money from your individual retirement account into a health savings account like you would another IRA. However, you're usually allowed to make a "funding distribution" to move money from an IRA to an HSA, which is particularly useful if you need money for medical expenses but don't have the cash to make a contribution to your HSA.

Funding Distribution Process

To perform a funding distribution, you must submit a funding distribution form to your HSA. The form must include your IRA account information, the amount you want transferred and your identifying information. Once you submit it, the bank that administers your HSA will automatically request the transfer from your IRA. Do not take a distribution from your IRA and then deposit it in your HSA. If you do, it will be treated as an IRA distribution and HSA contribution.

Distribution Size Limit

You can't transfer more from your IRA to your HSA than you could have contributed to your HSA for the year. In fact, the transfer counts against your annual HSA contribution. For example, say your contribution limit is $7,000. If you perform a $7,000 funding distribution from your IRA to your HSA, neither you nor your employer can contribute to your HSA for the year.

One-Time Transfer Rules

Usually, you're only allowed to make one funding distribution during your lifetime. If you used the exception in 2011, you're done. However, there is one exception. If you make a funding distribution during the year and then later switch from single coverage to family coverage, so your contribution limit increases, you can make a second funding distribution that same year to take advantage of your larger contribution limit.

Tax Reporting

You must report your funding distribution on your tax return, even though it doesn't affect your tax liability for the year. On Form 8889, line 10 is titled "Qualified HSA Funding Distributions" and used to enter the amount of your transfer. You must report the funding distribution in the calendar year that you made the transfer. Unlike IRA contributions, the deadline doesn't extend to your tax filing deadline. For example, if you make the funding distribution in February 2013, you must always report that transfer on your 2013 tax return.

Photo Credits

  • Jupiterimages/Goodshoot/Getty Images

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

Zacks Investment Research

is an A+ Rated BBB

Accredited Business.