Family HSA or self?

[Time2]

We were a family of four on an HDHP, I have been contibuting for many years to a family plan. I went on Medicare recently, my wife took on the excisting policy 'minus me'. Can she now open a separate Family policy and contribute the max?
Can she contibute into our excisting family plan?

 

[audreyh1]

There is no family HSA. They are individual. Since you are no longer qualified to contribute, she has to open her own HSA to make contributions.

 

[rodi]

We had two HSAs when my husband was pre-medicare. His was solo, mine was for myself and the kids. The total amount had to be under the family max for BOTH accounts combined.

(So yes- there are family HSAs - but not for 2 adults.)

When he went on medicare - his HSA was frozen to contributions, and I was able max out my HSA to the full family max limit.

In reality, it's all fungible since the kids are dependents - I can use money from either account for any medical bills the kids have.

 

[SevenUp]

We were a family of four on an HDHP, I have been contibuting for many years to a family plan. I went on Medicare recently, my wife took on the excisting policy 'minus me'. Can she now open a separate Family policy and contribute the max?
Can she contibute into our excisting family plan?

If your wife is over age 55, has she been contributing at least her own $1000/yr to her own HSA?

 

[fh2000]

We had two HSAs when my husband was pre-medicare. His was solo, mine was for myself and the kids. The total amount had to be under the family max for BOTH accounts combined.

(So yes- there are family HSAs - but not for 2 adults.)

When he went on medicare - his HSA was frozen to contributions, and I was able max out my HSA to the full family max limit.

In reality, it's all fungible since the kids are dependents - I can use money from either account for any medical bills the kids have.

If OP's other 2 family members (assuming also adults) file tax as independent but added to family HSA plan for healthcare purpose, the 2 members can also create their own HSA accounts. They each can contribute the full family max limit to their own account.

This is what happened to us during our final year with megacorp.

 

[pb4uski]

We had two HSAs when my husband was pre-medicare. His was solo, mine was for myself and the kids. The total amount had to be under the family max for BOTH accounts combined.

(So yes- there are family HSAs - but not for 2 adults.) ...

I think you're mistaken on that.... only individual adults can have HSAs... if you look at the titling on your HSA statement it will only be for one adult person.... it doesn't list your kids does it?

However, HSA money can be used for eligible expenses of you, your spouse or your dependents:

In addition to your spouse, you can spend your HSA dollars on your family. This generally includes your children or any other dependents you can claim on your tax return. The IRS defines dependents as a qualifying child or relative, based on the IRS guidelines. So this could include a family member relation for whom you care. This is a great incentive for people with kids as it allows many of their medical expenses to be purchased with pre-tax dollars, which saves money. Medical expenses for your dependents count as qualified medical expense, so go ahead and use your HSA for those purchases.

 

[Rianne]

Are we doing this all wrong? Our HSA is in my name, DH is a dependent and all his medical expenses are paid from my account. We are deducting $8K (contributing to HSA) on taxes, married filing jointly.
-If he opens his own HSA, what is his max contribution, what is my max contribution.
-We have an income from DH LLC, in home consulting...$42K/year. He plans to continue this until 65 (we're 62 now).

We've been doing this for 3 years, our medical broker has not steered us differently.


Edit: Our HDHP is in my name, DH a dependent (ACA).

 

[pb4uski]

Yes, the most that an individual can contribute to a HSA account in 2020 is $8,100 ($7,100 + $1,000 catch-up) and your DH can contribute $1,000 to his (assuming he over 55 and is covered by a HSA eligible policy). The family total for a couple 55 or over in 2020 is $9,100 and be split between the his and her HSA accounts however you wish as long and no more than $8,100 is contributed to any one account.

For married couples that have family coverage where both spouses are over age 55, each spouse can take advantage of the $1,000 catch-up, but in order to get the full $9,100 contribution, they will need to use two accounts. The contribution cannot be maximized with only one account. One individual would contribute the family coverage maximum plus his or her individual catch-up, and the other would contribute the catch-up maximum to his or her individual account.

As in 401k and IRA contributions, you are allowed to contribute extra if you are above a certain age. If you are age 55 or older by the end of year, you can contribute additional $1,000 to your HSA. If you are married, and both of you are age 55, each of you can contribute additional $1,000.

However, because HSA is in an individual’s name — there is no joint HSA even when you have family coverage — only the person age 55 or older can contribute the additional $1,000 in his or her own name. If only the husband is 55 or older and the wife contributes the full family contribution limit to the HSA in her name, the husband has to open a separate account for the additional $1,000. If both husband and wife are age 55 or older, they must have two HSA accounts if they want to contribute the maximum.

There’s no way to hit the combined maximum with only one account.

 

[fh2000]

Are we doing this all wrong? Our HSA is in my name, DH is a dependent and all his medical expenses are paid from my account. We are deducting $8K (contributing to HSA) on taxes, married filing jointly.
-If he opens his own HSA, what is his max contribution, what is my max contribution.
-We have an income from DH LLC, in home consulting...$42K/year. He plans to continue this until 65 (we're 62 now).

We've been doing this for 3 years, our medical broker has not steered us differently.


Edit: Our HDHP is in my name, DH a dependent (ACA).

If the family total is 8K (each year is slightly different), each of you can/should create your individual HSA account and contribute 4K to it.

TurboTax will guide you to enter this individually for 4K each, and come up with a total 8K for tax purpose. In fact, it will not allow you to enter more than 4K individually.

 

[SevenUp]

If the family total is 8K (each year is slightly different), each of you can/should create your individual HSA account and contribute 4K to it.

TurboTax will guide you to enter this individually for 4K each, and come up with a total 8K for tax purpose. In fact, it will not allow you to enter more than 4K individually.

Does TT really impose that $4K limit? The IRS does not.

From Instructions for Form 8889 (2019) | Internal Revenue Service (emphasis added):

If you are treated as having family coverage for each month, divide the amount on line 5 equally between you and your spouse, unless you both agree on a different allocation (such as allocating nothing to one spouse). Enter your allocable share on line 6.

 

[pb4uski]

+1 I'm skeptical that TT imposes a limit.... you can allocate the total contribution however you want as long as one person doesn't exceed the limit... and that only comes into play is one or both of you are 55 or older.

 

[Time2]

If OP's other 2 family members (assuming also adults) file tax as independent but added to family HSA plan for healthcare purpose, the 2 members can also create their own HSA accounts. They each can contribute the full family max limit to their own account.

This is what happened to us during our final year with megacorp.

I'd like more understanding on this, both my kids are adults, covered under my wife's HCHP policy. I'm in the process of opening an HSA in her name.

 

[pb4uski]

That's a interesting situation that I hadn't though of. So I assume that your "kids" are not dependents on your tax return but are under 26 and still on your HSA plan?

fh2000 seems to be suggesting that you and your DW could contribute $7,100 and each of the two kids could contribute $7,100... so $21,300 in total.

While I was skeptical because it seemed too good to be true, I found one source that indicated that it is true:

As long as they are covered on the family qualified HDHP, adult children can contribute the full family HSA amount into their HSA account. The dependent's contributions will not reduce the amount their parents can deposit into their accounts.

Example: Tim Jones has an HSA qualified HDHP through his employer. He covers himself, his wife Karen and their 24 year old daughter, Jill. Jill has a scheduled knee surgery. While Tim and Karen can’t use their HSA money toward Jill’s surgery, Jill can open her own HSA account and contribute the full family contribution to her HSA ($7,100 for 2020). She can use that HSA money to pay for her surgery out of pocket amount. Karen and Tim can also contribute the full family contribution into their HSA account as well.

Source: https://www.onedigital.com/blog/hsas-adult-children/

 

[SevenUp]

I'd like more understanding on this, both my kids are adults, covered under my wife's HCHP policy. I'm in the process of opening an HSA in her name.

See Publication 969:

To be an eligible individual and qualify for an HSA, you must meet the following requirements.

• You are covered under a high deductible health plan (HDHP), described later, on the first day of the month.
• You have no other health coverage except what is permitted under Other health coverage , later.
• You aren’t enrolled in Medicare.
• You can’t be claimed as a dependent on someone else’s 2019 tax return.

If your kids meet those requirements, they may open their own HSAs and contribute the family maximum.

 

[pb4uski]

So ignoring additional contributions for over 55, if the kids were not dependents but were on their HSA-eligible family plan, then the parents could contribute $7,100 to their HSAs (allocated however they wish) and each kid could contribute $7,100 to an individual HSA.... so for the 4 people on a single HSA-eligible health insurance policy they could contribute $21,300?

 

[SevenUp]

So ignoring additional contributions for over 55, if the kids were not dependents but were on their HSA-eligible family plan, then the parents could contribute $7,100 to their HSAs (allocated however they wish) and each kid could contribute $7,100 to an individual HSA.... so for the 4 people on a single HSA-eligible health insurance policy they could contribute $21,300?

Yes. As Ripley would say, Believe It or Not!

Two of our kids have used this feature of tax law.

 

[fh2000]

Does TT really impose that $4K limit? The IRS does not.

From Instructions for Form 8889 (2019) | Internal Revenue Service (emphasis added):

TurboTax question/answer interview goes thru each spouse, and each person can only contribute up to 4K because that is the personal limit. After second person putting in another 4K, the total contribution for the married couple filing jointly is therefore 8K.

For each person, if you enter more than 4K, TT will tell you that the personal limit has been exceeded. Now, some year I accidentally entered more, TT puts out an on screen message. I backed it out so I do not know if you really insist putting more than 4K, TT will accept it or not.

In practice, you can contribute more, but you will need to claim it back. I have experienced that too, when Megacorp contributed more and I had to ask HSA administration company to send me a check.

 

[SevenUp]

For each person, if you enter more than 4K, TT will tell you that the personal limit has been exceeded. Now, some year I accidentally entered more, TT puts out an on screen message. I backed it out so I do not know if you really insist putting more than 4K, TT will accept it or not.

TT has processed 8889s for us with one spouse having 0 and the other the full amount in one year, and switching who got what the next year. Don't recall if it made us jump through any hoops to do so.

 

[fh2000]

So ignoring additional contributions for over 55, if the kids were not dependents but were on their HSA-eligible family plan, then the parents could contribute $7,100 to their HSAs (allocated however they wish) and each kid could contribute $7,100 to an individual HSA.... so for the 4 people on a single HSA-eligible health insurance policy they could contribute $21,300?

Yes. That is exactly how that works. I only had this opportunity in one year and my 2 children each opened a Fidelity HSA account and contributed the full family amount.

 

[fh2000]

I'd like more understanding on this, both my kids are adults, covered under my wife's HCHP policy. I'm in the process of opening an HSA in her name.

If your children use TurboTax, you can ask them to file a test federal return, and in HSA portion enter the full family amount to see if TT will process the return.

It will help you understand this benefit if you see it yourself.

 

[Time2]

That's a interesting situation that I hadn't though of. So I assume that your "kids" are not dependents on your tax return but are under 26 and still on your HSA plan?

fh2000 seems to be suggesting that you and your DW could contribute $7,100 and each of the two kids could contribute $7,100... so $21,300 in total.

While I was skeptical because it seemed too good to be true, I found one source that indicated that it is true:

Yes, not dependent, but on my wife's HDHP, and would be allowed expenses to be covered by her HSA. However, if they were allowed to open their own HSA, I suspect, they could only use their own HSA funds?
Ya, I'm so lucky;-) a 29 year old and a 26 year old, still on our policy. I have run this by BCBS and they know the age of my kids and say that it is not a problem.

 

[SevenUp]

Yes, not dependent, but on my wife's HDHP, and would be allowed expenses to be covered by her HSA.

That's not the way it works, unless they fit a narrow exception.

See Pub 969:

Qualified medical expenses are those incurred by the following persons.

1.You and your spouse.
2.All dependents you claim on your tax return.
3.Any person you could have claimed as a dependent on your return except that:
a.The person filed a joint return;
b.The person had gross income of $4,200 or more;
c....

 

[fh2000]

Yes, not dependent, but on my wife's HDHP, and would be allowed expenses to be covered by her HSA. However, if they were allowed to open their own HSA, I suspect, they could only use their own HSA funds?
Ya, I'm so lucky;-) a 29 year old and a 26 year old, still on our policy. I have run this by BCBS and they know the age of my kids and say that it is not a problem.

ACA allows 26 year olds to be added to the parent's policy. I am only aware that New York state also allows up to 29 years old to be added to the parent's policy. You must be in New York then.

 

[Time2]

ACA allows 26 year olds to be added to the parent's policy. I am only aware that New York state also allows up to 29 years old to be added to the parent's policy. You must be in New York then.

I'm in Florida. I have ask about this at least twice.
And they said it is OK. Maybe I need to check again.

 

[Time2]

Sounds like my wife just needs to open up the HSA and cntrubute the family max plus $1,000.