A Health Savings Account (HSA) is an amazing way to help you pay for qualified medical expenses. If you’re looking specifically for what is considered a qualified medical expense, you can find that list here. The next question is who exactly can you use your HSA funds for?
What’s the Difference Between an Individual HSA and Family HSA?
Health Savings Accounts are owned by one person. An HSA is an individual account and are established using the name and tax ID number of one specific individual.
An individual's coverage under a High Deductible Health Plan determines the amount they can contribute - the “family” amount or the “individual” amount - to an HSA.
If a person has family coverage under an HDHP, they can contribute $7,100 to an HSA in 2020. If a person has individual coverage under an HDHP, they can contribute up to $3,550 in 2020. Those over 55 can make an additional catch-up contribution of $1,000.
You must be covered under an HDHP to make HSA contributions. If you change health insurance coverage, you can still use the existing HSA funds for qualified medical expenses, but cannot make additional contributions when not covered under an HDHP.
What Can I Use My HSA Funds For? Who is Covered?
Once you’ve obtained qualified HDHP coverage, established the HSA, and made contributions - you need to know what you can use the money for.
As for the “what,” you can spend your HSA funds on qualified medical expenses. Many healthcare services and products are included, IRS Publication 529 lists HSA eligible items.
When it comes to the “who” part, there are three groups of people you can use your HSA funds for.
IRS Publication 969 states:
Qualified medical expenses are incurred by the following:
- Your spouse
- Any dependents you claim on your tax return
Anyone you could claim as a dependent on your tax return, but don’t for varying reasons
Even if you have “self-only” HDHP coverage, you can use your HSA funds on these individuals.
You and Your Spouse
It goes without saying that you can spend your HSA funds on yourself. You can also use the funds for qualified medical expenses for your spouse - even if you have “self-only” HDHP coverage.
The plan owner does not have to be present when their spouse uses HSA funds. Your spouse can also use their own cash, debit, or credit card to pay and then reimburse themselves with the HSA funds. Be sure to keep every receipt to justify the reimbursements. Your spouse can obtain healthcare using pre-tax dollars using the HSA money.
Your Children and Other Dependents
You can use HSA money on your children and other dependents. The IRS’ definition of a dependent is a qualifying child or relative, which could include a related member of your family you care for. Dependent expenditures are qualified medical expenses, so make the most of your HSA funds!
Those you Could Claim as Dependents
There is a third group of people you can use your HSA funds for. The IRS words it as people who could have been your dependent but were not for varying reasons.
This group is defined as: Any person you could have claimed as a dependent on your tax return except that:
- The person filed a joint tax return
- The person had a gross income of $4,050 or more
- You, or your spouse, if filing jointly, could be claimed as a dependent on someone else's tax return
A couple of examples include a child whose income is above the limit, so they may not qualify as an IRS dependent, or a married child who files a joint tax return but is still eligible for coverage under your plan. You can use your HSA funds for their qualified medical expenses in these cases.
To wrap it up, you can use HSA funds for you, your spouse, your children, and other dependents, and even those you could claim as dependents but don’t for some reason or another. HSAs become even more appealing, knowing you can use pre-tax dollars to pay for your entire family’s healthcare expenses!
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.