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Tax Benefits of Health Savings Accounts 
 
by kmhagen August 15, 2005

Rollovers and the Balance in an HSA

The balance in your HSA can be carried forward from one year to the next, and earnings on the balance that remain in your account are not subject to income tax.

Rollovers

You can roll over amounts from an Archer MSA or from other HSAs  into your HSA.  The rollovers do not have to be in cash – they could be in securities or other property.  But you cannot roll over amounts from an IRA, an HRA or a health  FSA into an HSA.

Rollovers are not subject to the annual contribution limits.  You can make one rollover to an HSA per year, and it must be made within 60 days of the date of receipt.

When you set up an HSA, you should name a beneficiary in the event of your death. Your HAS will become your spouse’s HSA after your death.  If you name a beneficiary other than your spouse, the account ceases to be an HSA upon your death, and the fair market value of the HSA is taxable to the beneficiary in the year of your death.  In this case, the amount subject to tax can be reduced by any qualified medical expenses the beneficiary pays for the decedent within one year from the date of death.

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