Call for a quote:

833-962-2720

Learn » Health Insurance » Self-Employed HSA: 9 Health Savings Account Benefits

Self-Employed HSA: 9 Health Savings Account Benefits

HSAs are more than just a way to save for future healthcare expenses.

September 18, 2017 - By HealthCare.com Staff - read

Are you self-employed? The United States is home to 14.4 million self-employed individuals just like you. Unless you have access to health insurance through a spouse or are eligible to stay on your parent’s plan, you must pay entirely for your own healthcare coverage.

If you are relatively healthy and have few medical needs in an average year, a high deductible health insurance plan paired with a health savings account (HSA) can be a smart option. HSAs typically mean lower monthly premiums and a place to set aside funds for a proverbial rainy day. They offer many tax advantages and other benefits that can make self-employed HSAs particularly appealing.

Get a Free Health Insurance Quote

  • Get an instant quote for health insurance plans
  • Compare prices from over 300 carriers
  • Find a plan that fits your budget
Please enter a valid US Zip Code

1. There Are No Contribution Minimums 

When you set up an HSA, you do not have to commit to a certain contribution amount or frequency—great news for those with incomes that vary. Better yet, there is no minimum annual contribution.

However, there is an annual contribution limit set by the IRS each year. Recent limits were:

  • Individual-only coverage: $3,350
  • Family coverage: $6,650

With a self-employed HSA, you’ll have the control to make uneven deposits throughout the year. You can make one deposit. You can elect not to make a deposit at all.

2. Friends and Family Can Contribute to Your HSA

If someone wants to give the gift of helping you pay for medical care, they can. Your HSA may be yours, but friends and relatives can deposit funds into it anytime.

3. HSA Contributions Are Tax-Deductible

When you are self-employed, you often want all the deductions you can get. An self-employed HSA gives you an opportunity to take another one. You can claim a tax deduction for contributions you or others make to your HSA, with the exception of an employer. Others cannot claim a tax deduction for their contributions to your HSA.

4. Interest Gained on an HSA Is Tax-Free

Unused funds sitting in an HSA earn interest, and the interest that accrues is tax free. That interest will compound over time and when you have an unexpected or major healthcare expense, you can withdraw the funds to help pay those medical bills. Yet another reason to hit your annual contribution limit each year and save, save, save.

5. Funds Used for Qualified Medical Expenses Are Not Taxed

You can use HSA funds to pay for healthcare, tax free. HSA distributions made for medical and dental items and services that qualify for the medical and dental expenses deduction are not taxed.

According to the IRS, qualified medical expenses may be incurred by:

  1. You and your spouse
  2. All dependents you claim on your tax return
  3. Any person you could have claimed as a dependent on your return except that:
    1. The person filed a joint return
    2. The person had a gross income of $3,900 or more
    3. You, or your spouse if filing jointly, could be claimed as a dependent on someone else’s return

IRS Publication 502, Medical and Dental Expenses provides information on what items and services qualify for the medical and dental expenses deduction.

6. HSA Accounts Are Portable

If you cease to be self-employed, you can keep your self-employed HSA. You can also keep it if you change jobs, stop working or switch to health insurance coverage that is not an HDHP.

The rule with an HSA is that you can use it as long as it has funds, but you may only contribute to it when it is paired with a high deductible health plan.

High deductible health plans, as defined by the IRS for calendar year 2015, have an annual deductible no less than:

  • $1,300 for self-only coverage; out-of-pocket expenses cannot exceed $6,450
  • $2,600 for family coverage; out-of-pocket expenses cannot exceed $12,900

Out-of-pocket expenses may include deductible, copayments, coinsurance and other amounts; they do not include premiums.

7. Account Dollars Roll Over Year After Year 

The phrase “use it or lose it” does not apply to HSAs. You do not have to scramble at year’s end to find ways to use what you’ve set aside. An HSA is about savings. Again, interest will accrue on unused funds. It is to your advantage to let account dollars roll over. Ride it out through your healthy years and draw from it when the medical bills hit.

8. An HSA Can Be Used in Retirement

When you reach age 65 and enroll in Medicare, you can no longer contribute to your HSA. You may, however, continue using funds for qualified medical expenses. As a matter of fact, once you reach age 65, you can use your self-employed HSA however you wish; however, keep in mind it that funds used for anything other than qualified medical expenses will be taxed as income.

If you withdraw funds for anything other than qualified medical expenses before age 65 you will face a 20 percent penalty, plus taxes.

9. HSA Funds Can Be Invested

Depending on which self-employed HSA administrator you select, you may have options to invest HSA funds once your account reaches a minimum balance. This is another advantage to setting aside money in an HSA, especially when you are self-employed and entirely responsible for your own healthcare expenses and retirement savings. If you have few medical expenses in a given year and do not expect to rely heavily on HSA funds, it might be wise to select an HSA with investment options.

Taking the Next Steps

Discuss an HSA with your employer, or ask your health insurer if they can help to connect you with one.

For More Reading:

To Get Health Insurance Quotes:

Search for an HSA-compatible plan using HealthCare.com’s insurance comparison engine.

Get a Free Health Insurance Quote

  • Get an instant quote for health insurance plans
  • Compare prices from over 300 carriers
  • Find a plan that fits your budget
Please enter a valid US Zip Code
Get Live Health Insurance Help Now