October 18th 2025.
Self-employed individuals, such as small-business owners and independent contractors, are always on the lookout for ways to reduce their tax bill and manage healthcare costs more effectively. One option that often goes unnoticed by new entrepreneurs is a health savings account, or HSA for short.
An HSA is a special account that offers tax benefits and allows you to use tax-free funds to pay for qualified medical expenses, including vision care and dental services. Unlike a flexible spending account (FSA), which is offered and managed by an employer, an HSA can be set up and managed by self-employed individuals. GoodRx, a platform for medication savings, shares important information to consider before opening an HSA on your own.
So, can a self-employed person have an HSA? The answer is yes. If you are a freelancer, business owner, or independent contractor and have a qualified high-deductible health plan (HDHP), you may be eligible for an HSA. This includes individuals who work for companies like Instacart, Uber, or as a freelance consultant. You do not need to have an employer or a full-time job to have an HSA.
However, there are certain requirements that self-employed individuals must meet before opening an HSA. The most important one is having a qualified HDHP, which typically has higher deductibles and lower monthly premiums compared to other types of health insurance plans. Additionally, you must have no other health coverage except for certain disregarded coverage, like dental and vision insurance. Medicare enrollees and individuals who are claimed as dependents on someone else's tax return are not eligible for an HSA.
Starting in 2026, the eligibility rules for HSAs will expand under the One Big Beautiful Bill Act. This change will make it easier for more self-employed individuals to take advantage of the tax benefits of an HSA without having to switch to a traditional HDHP.
If you meet the qualifications for an HSA, you will need to find a custodian or administrator for your account. This can be a bank, credit union, insurance company, or brokerage that is approved by the IRS. It's essential to research and ask important questions, such as the administration fees, minimum balance requirements, investment options, and debit card availability, before choosing an HSA provider.
As a sole proprietor, you will not have an employer contributing to your HSA or covering administrative fees. Therefore, it's crucial to carefully consider your options and choose an HSA that meets your needs. It's also important to note that the HSA contribution limits are the same for traditional employees and sole proprietors, but the process of contributing may differ. While employees can make pretax contributions through their payroll, self-employed individuals usually make after-tax contributions and claim a deduction when filing their taxes.
The amount you can contribute to your HSA depends on your health plan coverage and age. For individuals over 55, an additional $1,000 can be contributed to their account. Other factors that may affect your contribution limit include your self-employment income and the type of HSA-eligible health plan you have.
In summary, self-employed individuals can open and benefit from an HSA if they have a qualified HDHP. It's crucial to understand the rules and requirements before opening an account and to carefully consider your options when choosing an HSA provider. With proper research and planning, an HSA can be a valuable tool for reducing healthcare costs and managing taxes for self-employed individuals.
Self-employed individuals, like small business owners and independent contractors, are always searching for ways to minimize their tax bill and effectively manage healthcare costs. One option that is often overlooked by new entrepreneurs is a health savings account.
A health savings account, or HSA, is a special account that allows you to pay for qualified medical expenses with tax-free dollars. This includes things like vision care and dental services. Unlike a flexible spending account, which is typically set up and managed by an employer, an HSA can be set up and managed by self-employed individuals. GoodRx, a platform for medication savings, has some important advice for anyone considering opening their own HSA.
So, can self-employed individuals have an HSA? The answer is yes, as long as they have a qualified high-deductible health plan. This includes people like freelance consultants, Uber drivers, and small business owners. You don't need to have an employer or a full-time job to be eligible for an HSA.
However, before opening an HSA, there are a few rules that self-employed individuals should be aware of. First and foremost, you must have a qualified high-deductible health plan, or HDHP. This means that your health insurance plan must meet certain annual out-of-pocket expense limits and minimum deductible amounts. These types of plans typically have higher deductibles and lower monthly premiums than other types of coverage.
In addition to having a qualified HDHP, there are other requirements that must be met in order to open an HSA. For example, you can't have any other health coverage besides certain types of disregarded coverage, like dental and vision insurance. Additionally, individuals enrolled in Medicare are not allowed to contribute to an HSA, and dependents on someone else's tax return are also not eligible. It's also important to note that you must have HDHP coverage on the first day of the last month of the year in order to meet the "last-month rule," which usually falls on December 1 for self-employed individuals with a plan year starting on January 1.
Starting in 2026, the eligibility rules for health savings accounts will expand under the One Big Beautiful Bill Act. This will reclassify bronze and catastrophic Affordable Care Act marketplace plans as qualifying HDHPs, making it easier for more self-employed individuals to take advantage of the tax benefits of an HSA without having to switch to a traditional HDHP.
If you meet the qualifications for an HSA, you will need to find a custodian or administrator for your account. This can be a bank, credit union, insurance company, or brokerage approved by the IRS. When choosing an HSA provider, it's important to consider things like administration fees, minimum account balances, investment options, investment fees, and whether or not you will receive a debit card or need to submit receipts for reimbursement. As a sole proprietor, you won't have an employer contributing on your behalf or covering administrative fees, so it's essential to do your research and ask the right questions to ensure that the HSA meets your needs. You can compare HSA providers online to help you make the best decision.
While the HSA qualifications for traditional employees and sole proprietors are the same, there may be a difference in how contributions are made. Typically, an employee will tell their employer how much they want to contribute to their HSA, and the employer may also contribute money to enhance employee benefits. The total amount contributed by both the employer and employee cannot exceed annual limits. The employee's contribution is usually deducted from their paycheck before taxes, which can reduce their taxable income and save them money during tax time.
As a self-employed individual, you will have to set up your own HSA contributions. This means you can transfer money from your checking account to your HSA whenever you want. Many self-employed individuals make after-tax contributions to their HSA, which allows them to claim a deduction when filing their tax returns.
The amount you can contribute to your HSA depends on whether you have individual or family coverage, as well as your age. If you are 55 or older, you can contribute an additional $1,000 to your account. Other factors that can affect your contribution limit include your health plan's deductible and out-of-pocket maximum. It's important to stay informed about these limits and any changes to HSA regulations in order to make the most of your account.
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