From the Desk of Dean Mailhes

In my November 2018 email newsletter, I discussed using IRA Required Distributions to fund a charitable contribution (called qualified charitable distributions, QCDs). Let's look at one more underused strategy.

While not as lucrative as QCDs the Qualified HSA Distribution should not be overlooked. Under IRA rules an IRA owner can make a one-time, non-taxable transfer of the annual HSA contribution limit from their ROTH or Traditional IRA to their Health Savings Account (HSA). The individual must be eligible for an HSA meaning their only health plan is a high deductible plan (no Medicare). The limit for 2019 is $3,500 or $4,500 if you are over 55.

Since distributions from HSAs are not taxable if used for qualified medical expenses individuals are effectively moving $4,500 (if over 55) from a taxable account into a tax-free account. That assumes they use a traditional IRA to fund the transfer.

There are several other factors to consider, but Qualified HSA distributions are something to discuss with your Advisor.