Can you use your health savings account (HSA) to pay for the expenses of family members and dependents? For specific family members, the answer is definitely yes. Here is a look at how the IRS allows you to use your HSA to pay for the healthcare costs of your loved ones.
Who Qualifies to Have a Health Savings Account?
Under IRS requirements, to qualify for an HSA, an individual must:
- Be enrolled in a high deductible health plan (HDHP) and have no other disqualifying health coverage that pays for medical expenses before the deductible is reached
- Not be enrolled in Medicare
- Not be claimed as a dependent on someone else’s current year tax return
Who Is Eligible for Reimbursement From an HSA?
The following individuals are eligible for reimbursement for qualified medical expenses under IRS rules:
- Yourself
- Your spouse
- Dependents you claimed on your most recent tax return
- Dependents you could have claimed on your tax return but did not
The only circumstance under which you can use your HSA to pay for healthcare costs of someone who is not a relative is if you have named that person as a dependent on your most recent tax return. For a non-relative to qualify as a dependent for tax purposes, that person must:
- Have lived in your household all year
- Have a gross income for that year of less than $4,500, not including tax-exempt income
- Receive more than half of his or her financial support from you
- Not file a joint return with another person
What Can an HSA Be Used For?
A health savings account allows you to set aside money on a pre-tax basis to pay for qualified medical expenses, as defined in federal tax law. A detailed description can be found in IRS Publication 502. Funds in an HSA can be used to pay for deductibles, copayments, coinsurance, and other qualified medical expenses. This can help lower your overall healthcare costs.
Examples of IRS-qualified medical expenses HSA funds can be used for include:
- Acupuncture
- Birth control treatment
- Blood sugar test kits for diabetics
- Chiropractors
- Contact lenses
- Crutches
- Dental treatments
- Doctor’s office visits
- Drug prescriptions
- Flu shots
- Guide dogs
- Infertility treatments
- Laser eye surgery
- Medical alert bracelets
- Midwives
- Over-the-counter medications
- Physical therapy
- Speech therapy
- Stop smoking prescription products
- Vasectomies
- Vision exams
- Walkers
- Wheelchairs
You can use pre-tax dollars in an HSA to cover the costs of these types of services and products for yourself and your family. Withdrawals from an HSA to pay for qualified medical expenses are tax-free.
What Are the Advantages of Health Savings Accounts?
The amount you deposit in your HSA can be deducted from the income on which you pay federal taxes. Any unspent HSA funds will roll over to the next year, allowing you to build tax-free savings that can be used to pay for medical expenses later on. HSAs can earn interest which is not subject to taxes. Speak with our friendly agent for information about health savings accounts.