Medicare and HSA Rules: What to Know (2026)

The month any part of Medicare starts, your legal limit on new HSA contributions drops to zero, and a backdated enrollment rule can quietly turn last year's contributions into a tax bill. Health Savings Accounts and Medicare don't mix the way people expect, and the place it goes wrong is timing. This guide walks through what changes when you enroll, the six-month trap that catches people who work past 65, what you can still spend your HSA on, and the 2026 contribution limits.

The one Medicare and HSA rule that surprises everyone

You can keep your HSA after you go on Medicare. What you can't do is keep funding it.

A Health Savings Account is paired with a high-deductible health plan, and the tax rules say you can only contribute while you have that qualifying coverage and no disqualifying coverage. Medicare counts as disqualifying coverage. So beginning the first month you're enrolled in any part of Medicare, including premium-free Part A, your HSA contribution limit is zero, per IRS Publication 969. It isn't reduced or prorated for that month. It's zero.1

This catches people because Part A enrollment is often automatic and easy to forget. If you're 65 or older and entitled to monthly Social Security benefits, federal rules give you Part A without an application, whether you thought about it or not.2 From that month forward, any money you or your employer puts into your HSA is an excess contribution.

How the six-month trap works

This is the costliest mistake, so it's worth slowing down on.

Say you turn 66 and decide to retire. You apply for Social Security in June. Because you're past 65 and now entitled to those benefits, Part A comes with them, and the Social Security Administration says Part A coverage begins up to six months before the month you apply if you're over 65, here as far back as December of the prior year.2,1 The catch is that you were contributing to your HSA through your employer's plan for all of those months, January through June, believing you were still eligible. You weren't. Part A had retroactively started in December, so every contribution after that point is an excess contribution.

Excess contributions don't just get refunded quietly. They aren't deductible, and you generally owe a 6% excise tax that applies for each tax year the excess stays in the account. That excise tax is avoidable if you act in time. IRS Publication 969 says you may withdraw some or all of the excess and avoid the excise tax on the amount withdrawn, provided you withdraw it by the due date of your return for the year the contributions were made (including extensions), also withdraw any income earned on it, and report those earnings as other income. So the concrete next step is to call your HSA custodian before that deadline. It's far easier to never make them.1

The practical rule is simple to state and easy to get wrong. If you think you'll enroll in Medicare or start Social Security at some point, stop HSA contributions six full months before that date. People who plan to work well past 65 sometimes set a personal cutoff the moment they decide on a retirement timeline, precisely so the backdating can't reach a single contributed dollar.

What you can still do with your HSA on Medicare

Losing the ability to contribute doesn't lock up the balance you already have. The funds stay yours, and they keep their tax advantage when you spend them on qualified medical expenses.

In fact, an HSA stays genuinely useful once you're on Medicare, because it can still pay for health costs tax-free:1

• Medicare premiums. Once you're 65 or older, you can use HSA funds tax-free for Medicare premiums. IRS Publication 969 words that exception as "Medicare and other health care coverage," not part by part.
• Qualified medical expenses. IRS Publication 969 lets you take tax-free distributions to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA, and enrolling in Medicare doesn't end that.

There's one important exception. You cannot use HSA funds tax-free to pay a Medigap (Medicare Supplement) premium. Medigap premiums are specifically excluded, even though most other Medicare premiums are allowed. Pay those with other money.1

If you're working past 65

A lot of people now stay on the job past 65 and keep their employer's high-deductible health plan, which is exactly the setup that makes an HSA worth protecting. You can keep contributing, but only under specific conditions.

The key idea is that HSA eligibility is determined month by month. You can contribute for any month in which you have qualifying high-deductible coverage and no part of Medicare, including no retroactive Part A. The federal guidance on working past 65 explains how delaying Medicare works when you have current employer coverage. The thing to hold onto for HSA purposes: the moment any Medicare coverage begins, including a backdated Part A start, your contribution eligibility ends for those months.1

Two situations trip people up here:

• Drawing Social Security while still working. Once you're 65 or older and entitled to monthly Social Security benefits, Part A comes to you without an application, and your contribution limit drops to zero, even if you're still covered by your employer's plan.2 If you want to keep funding your HSA, you generally can't be collecting Social Security.
• Delaying both Medicare and Social Security. If you delay both, stay on your employer's high-deductible plan and have no other disqualifying coverage, you remain HSA-eligible. You can keep contributing for the months before any Medicare coverage begins, but plan for the up-to-six-month backdating when you finally enroll.

How and when you eventually move onto Medicare ties into your enrollment windows and how your coverage coordinates. The timing of that handoff is its own decision worth getting right.

2026 HSA contribution limits

For anyone still HSA-eligible in 2026, here are the figures the contribution rules are built around.1

Those two figures are what Rev. Proc. 2025-19 sets for 2026. The age-55 additional contribution comes from a different document: IRS Publication 969, for 2025 returns, says an eligible individual who is 55 or older at the end of the tax year has their contribution limit increased by $1,000.1 And remember the prorating rule: if you're only HSA-eligible for part of the year because Medicare starts mid-year, your annual limit is reduced for the months you're no longer eligible.

These figures and timing rules carry real tax consequences, and everyone's situation has its own wrinkles, so it's worth confirming your specific case with a tax professional before you act.

Learn More

Find personalized help timing your Medicare enrollment around an HSA at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.