Retirees who sign up for Medicare can no longer put money into a health savings account, and the ban starts with the first month of Medicare enrollment, not the month after. IRS Publication 969, the agency’s guide to the accounts, says “Beginning with the first month you are enrolled in Medicare, your contribution limit is zero.” Money that goes in anyway is an excess contribution, and the tax bill on it comes back every year it stays.
The rule catches workers who kept a high-deductible health plan and an HSA past 65, then applied for Medicare or Social Security. The 2026 contribution limits are $4,400 for self-only coverage and $8,750 for family coverage, but those figures stop mattering the moment Medicare begins.
Anyone with an HSA who is close to 65 should pin down two dates before the next deposit: when Medicare Part A would start, counting back six months if it is premium-free, and the date of the last deposit already made. A deposit dated on or after the Part A start date is an excess contribution, and the first step is to stop contributions the month that date is known.
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How the zero limit works
An HSA is tied to a high-deductible health plan, and Medicare enrollment ends the right to add to it. The IRS guide treats enrollment as the trigger, and it applies the zero limit to retroactive Medicare coverage too, so deposits made during a backdated period are treated as excess contributions.
The zero limit is about deposits. Workers 55 and older can normally add a $1,000 catch-up, a figure Publication 969 adds on top of the regular limit, and the rule is the same for everyone once Medicare begins: the limit the IRS applies is zero. Each spouse has a separate account and a separate Medicare date, so a couple can reach the line in different months.
The 2026 dollar figures come from Revenue Procedure 2025-19, which sets the HSA limits at $4,400 for self-only coverage and $8,750 for family coverage, with minimum deductibles of $1,700 and $3,400. Those are the ceilings for people who stay eligible, and Publication 969 puts the limit at zero beginning with the first Medicare month.
Why six months before Medicare is the safer stop
Premium-free Part A can be backdated. A Centers for Medicare & Medicaid Services fact sheet says coverage starts retroactively 6 months back for people eligible for premium-free Part A. The same sheet advises stopping HSA contributions 6 months before applying for Medicare or Social Security benefits.
A worker who applies for Social Security in September, for example, can have Part A reach back to March. Any HSA deposit made in those six months then lands in a month when the limit is retroactively zero. The deposit looked legal when it was made and turns into an excess contribution later.
Social Security’s booklet on retirement and survivors benefits says the same thing in plain terms. The booklet says that someone with an HSA cannot contribute once Medicare coverage begins, that contributions afterward may bring a tax penalty, and that anyone who wants to keep contributing should not apply for Medicare, Social Security or Railroad Retirement benefits.
The same booklet adds a limit on the backdating: premium-free Part A can start up to six months before the application date, but never earlier than the first month the person was eligible for Medicare. For someone who turned 65 long ago and applies late, the full six months can apply. For someone who applies in the month of the 65th birthday, there may be less to look back over.
What an excess deposit costs
The IRS charges a 6% excise tax on excess contributions, and the tax repeats for each year the excess stays in the account. Someone who put in the full $4,400 self-only limit after Medicare began owes $264 for that year. A family-limit deposit of $8,750 owes $525, and both figures come back the next year if nothing is withdrawn.
The tax is figured on Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, and the contributions themselves are reported on Form 8889 filed with Form 1040 or 1040-SR.
The last-month rule adds a second trap for people who retire mid-year. Under that rule, a person who is an eligible individual on the first day of the last month of the tax year, which is Dec. 1 for most taxpayers, is treated as eligible for the whole year and can contribute the full amount. Publication 969 then sets a testing period running through the last day of the 12th following month, and a person who stops being eligible in that window, for reasons other than death or disability, has the extra contributions added to taxable income plus a 10% additional tax.
Taking the money back out
Publication 969 gives a way to avoid the excise tax. The excess has to come out by the due date of the tax return, including extensions, and the earnings on that excess have to come out with it. Those earnings are reported as other income for the year of the withdrawal.
That makes timing the real cost. A deposit caught before the return is due can be withdrawn with its earnings, and the 6% never applies to the amount withdrawn. A deposit left in the account for a second year draws the tax a second time.
The practical step for anyone still working under a high-deductible plan is to work out the Medicare start date, including any six-month backdating, before the last HSA deposit. The IRS guide is the free official route for the rules, and a tax preparer can confirm how the excess is handled on Form 5329 and Form 8889.
Still adding to an HSA near Medicare age?
A deposit made after the Medicare date draws a 6% excise tax every year it stays in the account, which is $264 on a $4,400 deposit and $525 on $8,750. The backdating of Part A means the safe stopping point can be six months before the application.
Cut Your Retirement Tax Bill: 12 Moves sets out each income line that decides a retiree’s tax bill in 2026 numbers, and it names Form 5329 among the forms that go with the moves. It covers the new $6,000 senior deduction ($12,000 for a couple) for 2025 through 2028 and how much of Social Security is taxed, worked out on one worksheet.
The 2026 numbers sit on one page that is meant to stay handy, and a large-print edition comes with it.
Get the Cut Your Retirement Tax Bill guide: the 2026 numbers and the form for each move →
This article was produced with AI assistance and edited for accuracy against the sources linked above.
