A disability diagnosis, like cancer, can be a source of fear and concern as you seek to navigate the medical condition. In this article, we hope to alleviate any concerns or answer any questions you might have about using your HSA during this time.
Qualifying for Medicare
Your disability may qualify you for Medicare. Generally, a diagnosed disability that makes you unable to work for a year can qualify you for Medicare, even if you are under the age of 65. You can find a list of the official conditions here.
HSA contributions and Medicare enrollment
If you enroll in Medicare, you must stop making HSA contributions by the beginning of the month that you enroll into Medicare. Keeping with this timeline will ensure that you avoid taxes and penalties.
Qualified medical expenses
Regardless of your plan, you may use your HSA to pay for qualified medical expenses. (This includes payments for Medicare A and Part B.) Check out our guide to Qualified Medical Expenses to find out if you need a Letter of Medical Necessity from your doctor.
Withdrawals and 20% penalty
20% Penalty Reminder
If you withdraw your HSA funds for any reason besides paying for qualified medical expenses, those funds are taxed as ordinary income, and the IRS will impose a 20% penalty.
There are two exceptions to the 20% penalty:
You reach the age of 65.
You become disabled.
If you become disabled, you may be able to withdraw HSA funds without the 20% penalty. (The amounts withdrawn will still be taxable as ordinary income.)