Hardworking Seniors Act Allows HSA Contributions Past Age 65: New Rules Kick In 2026

Under current tax law, the moment you become eligible for Medicare Part A, your ability to put money into a Health Savings Account (HSA) hits a brick wall. This is a major headache for the growing number of people working well into their 60s who want to keep that triple-tax-advantaged savings vehicle humming. The Hardworking Seniors Act changes the game by amending Section 223 of the Internal Revenue Code, allowing individuals who are entitled to Medicare Part A solely because of their age to continue contributing to their HSAs, provided they still have a high-deductible health plan.

Keeping the Piggy Bank Open

Historically, the IRS viewed Medicare as 'disqualified coverage' for HSA purposes. This bill essentially tells the IRS to look the other way if your only Medicare coverage is the standard Part A you get for turning 65. Starting after December 31, 2026, if you are a 67-year-old still grinding at the office or running your own shop with a high-deductible plan, you can keep tucking away pre-tax dollars for future medical bills. It is a practical fix for the modern reality that 'retirement age' is no longer a hard line at 65. However, there is a catch: this exception only applies to age-based Medicare. If you are on Medicare Part A due to a disability, the old rules still apply, and your HSA contribution limit stays at zero.

The Fine Print on Spending

The bill also cleans up the rules for how you spend that cash once you hit the milestone. Currently, once you reach Medicare age, you can use HSA funds to pay for health insurance premiums (excluding supplemental 'Medigap' plans) without a penalty. This bill narrows that slightly: if you are still an 'eligible individual'—meaning you are still actively contributing to the HSA because you're working—you can't use the funds for premiums just yet. It keeps the account focused on savings while you are in your peak earning years.

No Free Passes on Non-Medical Spending

While the bill is generous on the contribution side, it keeps the guardrails up on spending. Usually, once you hit 65, the 20% penalty for using HSA money on non-medical stuff (like a boat or a vacation) disappears, though you still pay regular income tax on it. This legislation specifies that if you are taking advantage of these new rules to stay 'HSA-eligible' and keep contributing, you still owe that extra 20% penalty if you blow the money on non-qualified expenses. It’s a 'fair play' provision: if you want the tax perks of a saver, you have to actually use the money for healthcare. This ensures the accounts remain a tool for medical security rather than just a general-purpose tax shelter for high earners.