Can You Have Multiple Health Savings Accounts (HSAs)?

Managing one or more Health Savings Accounts can seem complicated. Laura answers a listener question about what do to when you end up with more than one HSA. Find out how these special accounts save money, the rules for using them, who can have one, and where to open one up.

Laura Adams, MBA
9-minute read
Episode #472

As the cost of health insurance continues to go up year after year, consumers need to do everything possible to get the best coverage at the lowest possible price.

No matter if you get health insurance through work or on your own, there’s an often-overlooked way to save money on medical expenses called a Health Savings Account or HSA.

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In this post I’ll explain how these special accounts work and who can have one. Plus, I’ll answer a listener question about what to do when you end up with more than one HSA.

Free Resource: Laura's Recommended Tools—over 40 of the best ways to earn more, save more, and accomplish more with your money!

How Do Health Savings Accounts (HSAs) Work?

Health Savings Accounts were created in 2003 to help consumers manage rising medical costs. Money goes into the account before it’s taxed, grows tax-deferred, and can be used to pay for current or future medical expenses tax free.

Contributions you make that were previously taxed can be deducted from your taxable income when you file your income tax return, even if you don’t itemize deductions. That means you never pay tax on money that goes into your HSA, which is a nice savings.

Using an HSA to pay for qualified medical, dental, and vision expenses is like getting a 20% to 30% discount, depending on your tax rate. Not bad!

Plus, a little-known benefit is that you can also use an HSA to boost your retirement savings. That’s because after your 65th birthday, you can take distributions to spend any way you like—even on non-medical expenses.

Using an HSA to pay for qualified medical, dental, and vision expenses is like getting a 20% to 30% discount, depending on your tax rate. Not bad!

You contribute money to an HSA and then spend it on a wide range of qualified, unreimbursed medical expenses until your deductible is met, or that aren’t covered by your health insurance. These might include copays for doctor visits, dental bills, or getting prescription glasses.  

But if you spend any amount of HSA funds on non-qualified expenses, like groceries or a ski trip, before reaching age 65, you’ll owe income tax plus a steep 20% penalty on those distributions.

What’s great about an HSA is that you own the account as an individual and control it completely—even when you get your health plan through an employer. You don’t need permission from an employer or the IRS to set up an HSA and it stays with you even if you change jobs or become unemployed.

There’s never a deadline to spend your HSA money. Funds can stay in the account indefinitely until you want to use them, even if you change your insurance company, become uninsured, or are unemployed.

There’s no maximum account balance limitation or any maximum income limits you have to meet to be eligible to contribute. You generally can use the funds for qualified medical expenses for you, your spouse, and dependents you claim on your tax return.

See also: How to Save Money on Healthcare with an HSA


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.