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Best HSA contribution?


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Based on the work/life scenario listed below--- I was wondering what the maximum HSA contribution would be for both individuals for 2018. They both have separate HDHP's.

My daughter and her fiancé have a child together (1 year old ) but are not married. They live and share a home (rental) together.

She is claiming the child as a dependent because her income is well below $200,000 and she will be able to file as head of household and also will receive the full child tax credit of $2,000. She had a HSA (self only) for the entire year and contributed $3,450 this year. She is 39 years old. 

Her fiancé makes too much income to receive the child tax credit but has the child on his health insurance because the health facility/doctor choices are a little better.  He will file as single for tax purposes. He also has a HSA for 2018 and contributed $3,450 (self only). He is also 39 years old. 

My question is: Are they maximizing their contributions to each HSA and can he actually have a family HSA because the child is on his medical plan and contribute to his HSA as a family plan ($6900)?

Any guidance is much appreciated.

Thank you,

Rick S.  

 

 

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  • david rigby changed the title to Best HSA contribution?

You are not subject to the rules for married people. Therefore, your combined HSA contributions are not limited to the HSA maximum family contribution limit.

So yes, your daughter's finance can make the HSA maximum family contribution limit, because they have self+1 coverage and she can make the HSA maximum self-only contribution limit. 

However, only your daughter can make tax-free distributions for qualified medical expenses for their child and they can not do so for each other's qualified medical expenses. An HSA can only be used to reimburse the the qualified medical expenses of themselves, their spouse and and their dependents.

The key point to remember is that HSA contribution rules, HSA distribution rules and income tax treatment of dependents can all vary.

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Spiritrider and others--

 

Your reply above got me to thinking---

If it made sense financially -- could both parents (not married) with separate HDHPs actually sign up for a family plan (i.e. the child would be on both parents HDHPs) and each contribute $7,000 to their respective HSA for 2019. 

In addition to the upfront family HSA tax deduction for both parents, the objective here would be to grow each HSA as much as possible (not use the HSA funds until much later in life) and pay for health expenses out of pocket until they are on Medicare.

In your earlier answer to me-- I assume if the child's healthcare expenses were reimbursed using one of the parents family HSA's it would be only allowed for the parent that claimed the child as a dependent on their tax return.

Thanks for your help.

Rick S

 

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Yes, the only determination of the HSA maximum contribution is your eligibility and coverage. Two unmarried individuals with a child together can both have self+1 coverage and each make the maximum family contribution.

This may make sense depending on the employee share of premiums and any employer contributions. I know of one such couple who actually profit from two policies, because each employer's contribution exceeds their premiums. The downside is that both have higher family deductibles.

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QDROphile--

I am intrigued and somewhat confused by your post above.

Are you saying that both parents (unmarried in this case with one child) are not allowed by law to cover their child with two separate family HDHP's by two different employers for the same child--

or are you saying that the law does not specify this scenario and by its absence or lack of specificity folks can cover their child with two separate HDHP plans if it makes sense for their situation?? 

Please provide some context when you can.

Thank you,

Rick S

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I am recalling the rules under section 125 relating to eligibility relating to dependents and complications arising out of divorce and the rules about which parent is considered as providing the support that is relevant to dependency.  Those rules can be reflected in plan terms.  I do not have a specific recollection relating to HSAs.  The yellow light went on with discussion of double dipping.  When a tax deal for regular folk sounds too good, caution is advisable.

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That may have been true prior to Obamacare, when coverage was extended to children < age 27. In order to do this a new "PPACA dependent child" was created,  defined as any child (son, daughter, stepson, stepdaughter, eligible foster child, or adopted child) < age 27.

As long as the 125 plan provides coverage for dependents (any child under 105b) they are eligible for coverage. There is no longer a requirement that the child be a tax dependent. This is what allows non-dependents covered under their parents HDHP to contribute to their own HSA, up to the full family limit, regardless of the parents contributions.

There is really no double-dipping going on the above case or two unmarried parents with self+1 coverage. Just separate HSA eligibility based on coverage. This is true if the 125 plan uses section 105b for definition of dependent and not section 152. Almost plans did so after the passage of Obamacare.

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