Transfers from an IRA are allowed from 2007 onward. Only one transfer from an IRA to an HSA is allowed, and the transferred amount cannot exceed the maximum annual contribution to the HSA for the year in which the transfer occurs. All IRA transfers must be in cash to ensure the transfer is coded as a contribution for the year. Transfers are allowed from IRAs and Roth IRAs; transfers are not allowed from a SIMPLE IRA. IRA transfers count against the HSA contribution limit for the year the transfer is made and must be transferred by December 31 of the same year.
For inherited IRA to HSA transfers, after the death of an IRA or Roth IRA owner, a qualified HSA funding distribution may be made from an IRA or Roth IRA maintained for the benefit of an IRA or Roth IRA beneficiary. This distribution will be taken into account in determining whether the required minimum distribution has been satisfied from the IRA.
1. IRA to HSA contributions are not tax deductible as an HSA contribution.
2. A qualified HSA funding distribution from an IRA enjoys an exception to the normal rule that IRA distributions are subject to tax and possibly a 10% penalty. The law allows for the basis (after-tax dollars) to remain in the IRA to the extent that such amount does not exceed the aggregate amount which would have been so included if there were a total distribution from the IRA or Roth IRA owner’s accounts. Basis is an important, but confusing, tax concept and suggest you consult with a tax adviser.