Health Savings Accounts (HSA) provide a tax deduction for contributions, tax-free growth, and even tax exemptions for qualified medical expenses. These tax breaks can make your family’s medical care more affordable. Although the account bears your personal name, you can also use it for the medical expenses your spouse incurs.
You can use your HSA to pay for qualified medical expenses for your eligible spouse as well as your eligible dependents.
HSA for Other People’s Medical Expenses
Obviously, you can use your HSA for your own medical expenses. You can also use the funds to pay for the qualified medical expenses of your spouse, any of your dependents, and anyone with whom you may have claimed to be a dependent except for the fact that her total income is too high or that she files a joint tax return. For example, if your spouse has a qualified medical expense that her insurance won’t cover or require co-payment, you can use your HSA to pay the bill.
Medical expenses eligibility
Eligible medical expenses include preventive care, routine visits, diagnosis, and treatment, including dental and vision treatment. For example, if your spouse needs fracture surgery, you can pay those costs with money from your HSA; You can also use your HSA to pay for your spouse’s dental work and eyeglasses. You can also pay health insurance premiums for yourself and your spouse from your HSA.
Penalties for unqualified expenses
If you use your HSA to pay for anything other than qualified medical expenses, the IRS will penalize you by calculating income tax, and it can also impose an additional 20 percent fine on withdrawals. For example, let’s say you’re in a 24 percent tax bracket and you take $1,000 from your HSA to buy your wife a necklace. You owe $240 in income taxes and can get an additional $200 in fines. However, if you are permanently disabled or over the age of 65, you don’t have to pay a 20 percent penalty.
There is no double benefit.
You cannot calculate any expenses you use the HSA fund to calculate your medical and dental expense deduction. For example, if you pay $8,000 of your spouse’s medical bill for the year with your HSA, when you calculate how much you can deduct your taxes, you can’t calculate any of the $8,000 that are part of your medical and dental expenses (or your spouse’s medical and dental expenses), but you will not have to pay taxes or fines on distribution from the HSA.