How does an HSA work with Medicare?

You may not contribute to an HSA if you are enrolled in Medicare. However, you may still use your existing HSA funds for eligible medical expenses tax-free (in most states). If you choose to use the funds for ineligible medical expenses, and you are age 65 and older, you must only pay income tax on the funds—the 20% additional tax penalty does not apply to you. If you are Medicare eligible, but you have not enrolled in Medicare, you are eligible to contribute to an HSA if you meet all other eligibility requirements.