HSA Guide for Travel Nurses: The Triple Tax Win

The Health Savings Account is the most underrated investment account in the U.S. tax code, and travel nurses are in a unique position to take advantage of it — or lose access to it, depending on which health plan they choose. Here’s everything you need to know.

What Makes the HSA Special

Most tax-advantaged accounts give you one tax break: either a deduction going in, or tax-free growth. The HSA gives you three:

1. Contributions are pre-tax (or tax-deductible if you contribute directly). You reduce your taxable income dollar-for-dollar.
2. Growth is tax-free. Investments in your HSA grow without capital gains, dividends tax, or income tax.
3. Withdrawals for qualified medical expenses are tax-free. You never pay tax on money used for healthcare.

Compare this to a traditional IRA: you get a deduction going in, but withdrawals are taxed. Or a Roth IRA: no deduction, but tax-free growth and withdrawals. The HSA beats both when used for healthcare expenses.

The Eligibility Rule: HDHP Required

You can only contribute to an HSA if you’re enrolled in a High Deductible Health Plan (HDHP). This is the main eligibility gate.

For 2024, an HDHP must have:

• Minimum deductible: $1,600 (individual) or $3,200 (family)
• Maximum out-of-pocket: $8,050 (individual) or $16,100 (family)

Many agency health plans are HDHPs — some agencies even offer HSA-compatible plans and will make employer contributions to your HSA. Check the specific plan documents, not just the summary.

If you’re enrolled in a non-HDHP plan (even just for one month), you cannot contribute to an HSA for that month. If you’re on a spouse’s non-HDHP plan, you’re also ineligible.

2024 Contribution Limits

• Individual coverage: $4,150
• Family coverage: $8,300
• Catch-up (age 55+): additional $1,000

You have until April 15 of the following year to make contributions for the prior year — same as an IRA. So if you realize in January that you should have maxed your HSA last year, you still have time.

If you’re only eligible for part of the year (because you switched to an HDHP mid-year), you can use the last-month rule: if you’re on an HDHP as of December 1, you can contribute the full annual limit. But you must stay on an HDHP for the following 12 months or you’ll owe taxes and a penalty on the excess.

The Travel Nurse-Specific Challenge

Health insurance for travel nurses is complicated. Between contracts, you may:

• Enroll in a new agency’s plan with a different deductible structure
• Use COBRA from a previous agency
• Go without coverage (not recommended)
• Join a spouse’s plan

Every time you switch health plans, check whether your new plan is an HDHP. HSA eligibility can flip on and off between contracts. You can only contribute for months you’re enrolled in a qualifying HDHP.

If you’re between agencies for a month and using COBRA, check if the COBRA plan is an HDHP. Most COBRA plans are simply continuations of your former employer’s plan — so if that plan was an HDHP, COBRA HDHP coverage counts.

Where to Hold Your HSA

Many employer-sponsored HSAs have limited investment options and charge monthly fees. You have two options:

Stay with employer HSA: Convenient if your agency makes contributions directly to it. Just accept the limited options.

Open your own HSA: You can contribute directly to an independent HSA provider at any time, regardless of whether your employer offers one. The best options for investors:

• Fidelity HSA: No monthly fees, full brokerage investment options including Fidelity’s zero-expense-ratio index funds
• Lively: No fees, integrates well, invests through Schwab
• HSA Bank: Large provider, investment options through TD Ameritrade

If your employer contributes to their HSA and yours has better options, you can do an annual HSA-to-HSA rollover to move funds to your preferred account. You’re allowed one rollover per 12-month period.

How to Actually Invest Your HSA

Many people treat their HSA like a checking account — money goes in, medical expenses come out. This is leaving huge tax-free growth on the table.

The smarter strategy: pay medical expenses out of pocket and invest your HSA contributions.

Here’s why: your HSA investments grow tax-free indefinitely. If you invest $4,150 today at 7% annual return, it becomes $31,600 in 30 years — tax-free if used for qualified medical expenses.

Meanwhile, you pay your medical expenses from regular savings and keep the receipt. There is no time limit on HSA reimbursement — you can reimburse yourself for medical expenses years or decades later, as long as the expense occurred after you opened the HSA. This is called “receipt banking” or the “HSA shoebox strategy.”

Once you’re 65, HSA funds can be withdrawn for any reason (not just medical) without penalty — you’ll just owe regular income tax, same as a traditional IRA. Effectively, the HSA becomes a bonus IRA at 65.

Qualified Medical Expenses

The IRS list of qualified medical expenses is broad. Common examples:

• Deductibles, copays, coinsurance
• Dental work (fillings, crowns, braces)
• Vision (glasses, contacts, LASIK)
• Mental health therapy
• Prescription medications
• Medical equipment
• Long-term care insurance premiums (limited amount)

One expense that does NOT qualify: health insurance premiums (with a few exceptions including COBRA and Medicare premiums).

The Investment Allocation

If you’re planning to invest your HSA for the long term and treat it as a retirement account:

• Under 50: Invest 100% in a broad stock index fund. Time horizon is long. Fidelity ZERO Total Market Index (FZROX) has 0% expense ratio.
• 50-60: Consider shifting to 80/20 stocks/bonds
• 60+: Gradually shift toward more conservative allocation

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Your next step: Check whether your current health plan is an HDHP by looking at the plan’s minimum deductible. If it qualifies, open a Fidelity HSA today, contribute the 2024 or 2025 maximum, and invest it in a low-cost index fund. Then start keeping receipts for out-of-pocket medical expenses in a folder labeled “HSA reimbursements.”