Familiar with the tax-saving benefits of a health savings account (HSA), and wondering how you can extend those benefits to your family? While an HSA is owned by one person, there is a way to tap into those HSA funds for the rest of your family. Discover how, and the differences between a family HSA and individual HSA.

Your plan is dependent on your health care coverage

To be eligible to contribute to an HSA, you must enroll in an eligible High-Deductible Health Plan (HDHP). The IRS sets annual minium deductibles for individual and family health care coverage, as well as annual out-of-pocket maximums, and usually update those annually based on inflation.

What is a Family HSA?

While often referred to as a “Family HSA” account, there is actually no such thing.

Each HSA is owned by one person. But family coverage under a qualifying HDHP allows you to use your HSA to pay for qualifying medical expenses for yourself and your family. The type of health plan (individual or family) you’re enrolled in decides how much you can contribute to your HSA account in one calendar year.

If you are enrolled in an individual qualifying high-deductible health plan, you will only be able to contribute the individual maximum contribution amount set annually by the IRS. If you and your family are covered by the same qualifying health plan, then your contribution limit is increased to the annual contribution limit set for families. One rule: To contribute the maximum family contribution limit, none of the family members can be claimed on another person’s tax return.

Annual HSA Contribution Limits

If you are enrolled in an individual qualifying high-deductible health plan, you will only be able to contribute the individual maximum contribution amount set annually by the IRS. If you and your family are covered by the same qualifying health plan, then your contribution limit is increased to the annual contribution limit set for families.

One rule: To contribute the maximum family contribution limit, none of the family members can be claimed on another person’s tax return.

If enrolled in an HSA-eligible HDHP, and at least 55 years old—or will be 55 any time in the calendar year—you can make an extra $1,000 contribution. This is a “Catch-Up” Contribution.

Real-life examples

Individual health plan with HSA

During open enrollment, James chooses an HDHP because he wants to take advantage of his employer’s contributions to an HSA. James is not currently married and doesn’t have any dependents, so his health plan will cover only him.

As an individual, James can contribute up to the individual annual HSA contribution limit without a penalty.

Family Health Plan with HSA

Fast forward a few years, and James is now married with two children. James is at a different company, but still has his HSA and an HDHP that covers him and his family.

James is now eligible to contribute the family limit to his HSA, and while the contribution limits often change annually, he knows he'll be able to contribute up the the annual family HSA contribution limit within one calendar year.

Can I Have a Joint HSA With My Spouse?

Short answer: No. An HSA is owned by one person.

Yet, there is a way for you and your spouse to have HSAs of your own. If you and your spouse are covered under the same HDHP, you can each open your own HSA and contribute separately. But, the amount you and your spouse contribute, combined, cannot exceed the contribution limit for a family plan.

Real-life examples:

Family HSA contribution limit with two accounts

Jack and Diane are married and covered under Jack’s high-deductible health plan. Diane wants to take advantage of her employer’s HSA contributions, so she decides to open up an HSA of her own.

However, Jack and Diane’s total, combined contributions cannot exceed the family contribution limit set for the IRS that year. That means that whatever Jack contributes to his HSA and whatever Diane contributes to her HSA added together needs less or equal to the annual contribution limit.

Jack and Diane can use these funds to pay for the qualified medical expenses of those covered under their health plan, including each other.

Family HSA contribution limit with one account

The other option is to have the entire amount of the HSA in one account holder’s name. In this case, Jack opts not to contribute anything into his HSA for the year, and Diane and her employer will be able to contribute the entire amount into her account.

The benefits of an HSA

There are four primary benefits of having an HSA.

1. Three levels of tax savings. Pre-tax or tax-deductible contributions. Tax-free interest, and investment earnings. And tax-free withdrawals when used for qualifying medical expenses.

2. Portability. HSAs aren’t tied to your employer. If you decide to move to a different company or retire, your HSA stays yours. The funds added to your account stay there until you choose to withdraw or roll it over; like a 401(k).

3. A safety net in the event of a health-related emergency. An HSA helps you save for the unknown. It can be used for unexpected health care expenses or health insurance if you’re between jobs. An HSA covers all qualified medical expenses, even after a change of plans or providers.

4. Flexibility in retirement. When you turn 65, your HSA can be used for non-health-related expenses without penalties; like a 401(k), or IRA.

An HSA is a great safety net in the event of a health-related emergency. And with options to invest, choosing to open an HSA is one of the best financial choices you can make for you and your family.

To learn more, or to open an HSA, get in touch with us at Lively.