Limits on usage of HSA funds

[sriki]

I had my HSA and HDHP setup when I started working for my current company a few years ago. At that point, I was not married. Then, I got married and my wife was added to my plan. This increased the amount of money we could put away in the HSA. Later, she started school and got on the school's plan. So, I adjusted my contributions accordingly. She will move back onto my plan next year.

So, the question is say, I have $10000 in my HSA, half of which was contributed when she was not on my plan and the half when she was on it. If she has medical expenses for $7000, could she use the HSA for all of that $7000 without running foul of any laws? A follow-up question for this Can I use my HSA funds to pay for say, a family member or friend's medical expenses?

 

[Matt]

I had my HSA and HDHP setup when I started working for my current company a few years ago. At that point, I was not married. Then, I got married and my wife was added to my plan. This increased the amount of money we could put away in the HSA. Later, she started school and got on the school's plan. So, I adjusted my contributions accordingly. She will move back onto my plan next year.

So, the question is say, I have $10000 in my HSA, half of which was contributed when she was not on my plan and the half when she was on it. If she has medical expenses for $7000, could she use the HSA for all of that $7000 without running foul of any laws? A follow-up question for this Can I use my HSA funds to pay for say, a family member or friend's medical expenses?

If they can be claimed as a dependant on your taxes then its generally OK to use the HSA funds for them, so you can narrow down from friends/distant relatives from there.

However, you may wish to not use the money as it does grow in a tax deferred manner, when you hit 65 you can withdraw it for any reason without a penalty, just paying income tax on it like a 401k. And if it is for an eligible reason then tax free. That's a lot of compound interest growth and dividends that could be reinvested etc..

 

[sriki]

If they can be claimed as a dependant on your taxes then its generally OK

Is it enough "IF" they can be claimed as a dependent or should they have been or will be claimed as a dependent?

My old HSA did not give access to investments before. So, withdrawing it seemed OK. However, I do have access to 401k type investing now. So, I won't be withdrawing it anytime soon. But, it' good to have the info on hand. Does the IRS care where the medical expense was incurred? as in a foreign country.

 

[Matt]

Is it enough "IF" they can be claimed as a dependent or should they have been or will be claimed as a dependent?

My old HSA did not give access to investments before. So, withdrawing it seemed OK. However, I do have access to 401k type investing now. So, I won't be withdrawing it anytime soon. But, it' good to have the info on hand. Does the IRS care where the medical expense was incurred? as in a foreign country.

It shouldn't matter where the expense occurred, but I believe that the person should actually be claimed as a dependent rather than could have been claimed (not 100% sure about that aspect though).

 

[kodiak jack]

From this link: https://www.key.com/personal/savings/health-savings-account-faq.jsp

Can I use the money in my HSA to pay for medical care for a family member?

Yes, you may withdraw funds to pay for the qualified medical expenses of yourself, your spouse or a dependent without tax penalty. This is one of the great advantages of HSAs.