Parents can generally use money saved in their Health Savings Account (HSA) tax-free to cover qualified medical expenses for their children. But there are important rules to understand:

A child must be a dependent on your tax return. The general rule is that HSAs can be used for anyone you claim as a dependent on your tax return.

To be claimed as a dependent a child must:

• Be under the age of 19 (or under the age of 24 if a student)

• Live with you for at least half the year

• Rely on you for at least half of his or her support.

Special note for divorced parents: Regardless of which parent claims a child as a dependent, both parents are allowed to make tax-free withdrawals from an HSA to cover qualified medical expenses of a child.

A child does not need to be covered by your high-deductible health plan (HDHP). You can make tax-free withdrawals from your HSA to cover qualified medical expenses of a child, regardless of whether a child is covered by your HDHP. The one rule is that you can’t use your HSA for qualified expenses that have already been reimbursed by the insurance policy covering your child.

Even if you are no longer enrolled in an HDHP, money you previously saved in an HSA can be used for a child’s medical expenses.

Adult children may not be eligible. Federal law allows parents to keep adult children on their health insurance plan until the age of 26. Children do not need to be claimed as a dependent to continue coverage on a parent’s health insurance plan until age 26.

But the rules for making tax-free withdrawals from your HSA to pay for a qualified medical expense of an adult child operate with different rules. The adult child can’t be older than 24 and must still be claimed as a dependent on your tax return.

That can create a tricky situation where your adult child can be covered by your HDHP, but if they are between the age of 24 or 26 -- or not a dependent on your tax return -- you can’t make tax-free withdrawals from your HSA to pay for their qualified expenses.

Stepchildren are Also Covered. The same rules apply to stepchildren.