Whose medical expenses an HSA can pay
Determine when an HSA may reimburse the account owner, spouse, dependents, and people covered by special dependency rules.
An HSA can generally pay qualified expenses of the owner, spouse, and dependents, including specified people who fail only limited dependency tests. They need not be covered by the owner's HDHP.
Coverage and expense eligibility differ
Contribution eligibility depends on the owner's coverage. Distribution eligibility asks who incurred the expense and whether that person meets the family or dependency rule. A spouse can have another plan and still have eligible expenses.
Document the relationship
Keep records supporting marriage or dependency for the expense year. Special rules address certain children of divorced or separated parents. A domestic partner does not qualify solely because a health plan treats the partner as family.
Example and common mistake
An owner pays a spouse's qualified dental bill even though the spouse has non-HDHP coverage. The expense can still qualify. Assuming everyone on family HDHP coverage automatically meets the tax dependency test is the mistake.
Test the patient relationship separately
For each family expense, document whether the patient was the owner's spouse or met the applicable dependent rules when the expense was incurred. The patient does not need to be covered by the owner's HDHP, and the patient's own HSA contribution eligibility is a different question. Divorce and changing dependency can alter the result across years.
Keep the family relationship or dependency workpaper with the itemized bill and reimbursement record. If another parent, insurer, FSA, or HRA pays part of the bill, only the unreimbursed qualifying balance remains available. Do not infer eligibility from the presence of a family member on an insurance card.
Questions to resolve
- Was the patient a spouse or qualifying dependent when care was incurred?
- What portion remained after all other reimbursements?
- Does the file separate patient eligibility from HDHP coverage and contribution eligibility?
Federal authority record
- IRS: Instructions for Form 8889
HSA contribution, deduction, distribution, excess, and filing rules - IRS: Publication 502 - Medical and Dental Expenses
Practical classification of section 213 medical expenses and insurance premiums - U.S. House Office of the Law Revision Counsel: 26 U.S.C. section 223 - Health savings accounts
HSA eligibility, contribution limits, qualified distributions, and beneficiary rules