Can a Self-Employed Person Have an HSA?

Health Savings Accounts (HSAs) offer a financial tool for managing healthcare costs, and self-employed individuals are eligible to establish and contribute to them. An HSA functions as a tax-advantaged savings account designed to help individuals save for medical expenses. It provides tax deductions, tax-free growth, and tax-free withdrawals for qualified medical costs.

Eligibility Requirements for Self-Employed

To qualify for an HSA, a self-employed individual must be covered by a High-Deductible Health Plan (HDHP). For 2025, an HDHP must have an annual deductible of at least $1,650 for self-only coverage or $3,300 for family coverage. The plan’s out-of-pocket maximums, including deductibles, copayments, and coinsurance, cannot exceed $8,300 for self-only coverage or $16,600 for family coverage in 2025.

An individual cannot be enrolled in Medicare Part A or Part B. Enrollment in Medicare disqualifies an individual from making new HSA contributions, though existing funds can still be used. The individual cannot be claimed as a dependent on another person’s tax return.

The self-employed individual generally cannot have other health coverage that is not an HDHP. Certain exceptions exist for “disregarded coverage,” such as specific disease insurance, accident, disability, dental, vision, or long-term care insurance.

Establishing an HSA

Once eligibility is confirmed, a self-employed individual can establish an HSA. These accounts are offered by various financial institutions, including banks, credit unions, and investment firms.

Opening an HSA requires personal information, such as a Social Security Number, date of birth, and contact information. The financial institution may also request proof of HDHP enrollment to verify eligibility.

The account setup process involves completing an application and possibly making an initial deposit. Choosing a provider should involve considering factors like account fees, interest rates, and any available investment options for the funds.

Making Contributions

Self-employed individuals contribute directly to their HSA. These contributions offer significant tax advantages. For 2025, the annual contribution limit for self-only HDHP coverage is $4,300, while those with family HDHP coverage can contribute up to $8,550. Individuals aged 55 and over can make an additional “catch-up” contribution of $1,000 annually.

Contributions are typically made by transferring funds directly to the HSA provider, via bank transfers, checks, or online payment portals. For self-employed individuals, these contributions are tax-deductible “above the line” on their tax return, reducing the individual’s adjusted gross income (AGI). This deduction is claimed regardless of whether the individual itemizes deductions.

The deadline for HSA contributions for a given tax year is generally the tax filing deadline for that year, typically April 15 of the following calendar year. Contributions cannot exceed the individual’s net self-employment income for the year.

Using Funds for Qualified Medical Expenses

Funds in an HSA can be used for qualified medical expenses, including common costs such such as doctor visits, prescription medications, dental care, and vision care. HSA funds also cover deductibles, copayments, and coinsurance amounts.

Distributions from an HSA are tax-free when used for qualified medical expenses. Eligible expenses include certain over-the-counter medications, feminine hygiene products, breast pumps, and some insurance premiums, such as long-term care insurance or COBRA continuation coverage.

If funds are withdrawn for non-qualified expenses, the distribution is subject to income tax. Additionally, a 20% penalty typically applies to non-qualified distributions if the account holder is under age 65. Maintaining detailed records of all qualified medical expenses is therefore important to substantiate tax-free withdrawals.