I saw in TT the question if my employers HSA contributions were put into my wifes HS account. I always thought only I could have HSA account and that contribution limits were family limits? Anyhow, my wife does not work anymore, she is on my employer medical plan (high deductible) - can she have an additional HSA on her own, so we can put more money aside for medical cost?
There is no employment or income requirement for making an HSA contribution. Since your spouse is covered by your HDHP plan through your employer, she can make a contribution to her own HSA.
The $6,750 contribution limit for having family HDHP coverage will be split between the two of you, so unless she was age 55 or older during the tax year and therefore can make a catch-up contribution for herself, you won't be able to increase the combined amount contributed to HSAs. If she was age 55 or older in the tax year, she can also make a $1,000 catch-up contribution (or some fraction thereof if you are not eligible for an entire year's contribution) to her own HSA.
There is no employment or income requirement for making an HSA contribution. Since your spouse is covered by your HDHP plan through your employer, she can make a contribution to her own HSA.
The $6,750 contribution limit for having family HDHP coverage will be split between the two of you, so unless she was age 55 or older during the tax year and therefore can make a catch-up contribution for herself, you won't be able to increase the combined amount contributed to HSAs. If she was age 55 or older in the tax year, she can also make a $1,000 catch-up contribution (or some fraction thereof if you are not eligible for an entire year's contribution) to her own HSA.
I just spoke with my HSA Bank. What they stated was that my spouse could only have her own HSA account if she had her own separate HDHP plan. What they said was "Only one HSA account can be attached to a policy."
That's entirely wrong. As long as neither spouse has any other, disqualifying coverage, both spouses are eligible individuals even if both are covered under the same family HDHP plan. I suggest that you (and the HSA Bank rep) read IRS Pub 969 and section 223(c)(1) of the US Code:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p969.pdf">https://www.irs.gov/pub/irs-pdf/p969.pdf</a>
<a rel="nofollow" target="_blank" href="https://www.law.cornell.edu/uscode/text/26/223#c_1">https://www.law.cornell.edu/uscode/text/26/223#c_1</a>
Maybe @litesign has a self only HDHP. Wouldn't that result in the answer they were given?
As written, the general statements are not correct since the statements are not qualified as applying only to the case where the individual has self-only coverage. However, in the context being discussed with the rep (but not stated here), the statement might have been conditioned by knowledge of litesign having self-only coverage. Regardless, the statement that "only one HSA account can be attached to a policy" is false. To make it true, the statement would have to be, "Only one HSA account can be attached to a self-only policy."
Thank you @dmertz for following up on this!
I was given incorrect information by my HSA bank. I do have family coverage" with my insurance. After I checked your references, I called them back and spoke to someone else who agreed with your assessment. In fact, their website states "If you have a qualified High Deductible Health Plan (HDHP), either through your employer, THROUGH YOUR SPOUSE, or one you've purchased on your own, chances are you can open an HSA. [CAPS are mine]."
It follows with some exceptions to this statement, none of which apply in my case.
So again, thank you! I can now have an additional tax deduction for last year and this year!
Does this apply even when the husband is on Part A Medicare but continuing to work? It is understood that contribution to his HSA must be zero. In other words, can they both still be covered by a HDHP through his employer and she open an HSA in her name and make her "individual" contributions to it along with her makeup (being over 55) contribution?
@Anonymous wrote:
Does this apply even when the husband is on Part A Medicare but continuing to work? It is understood that contribution to his HSA must be zero. In other words, can they both still be covered by a HDHP through his employer and she open an HSA in her name and make her "individual" contributions to it along with her makeup (being over 55) contribution?
Yes, it's still true. As long as you are covered by a qualifying HDHP and you are not covered by other insurance, you can contribute to an HSA. In this case, since it is a family HDHP, you can contribute up to the maximum for a family HSA. Even though your spouse is the named insurance holder but is disqualified for having other coverage at the same time (since his other coverage does not cover you.)
Thanks for the link to the IRS Doc on the matter. It's distorted on your post so I'm posting it cleared up here: https://www.irs.gov/pub/irs-pdf/p969.pdf
I'm a few years late to this particular thread. As I understand the replies, a non-working spouse can have her own HSA while qualifying through husband's HDHP and must share the maximum contribution limit but both can contribute an additional $1000 if over age 55.
Will the tax benefit be affected by only half being contributed by the husband through payroll deduction or will it all come out in the wash at the time of filing a tax return?
No, it does not matter if the contribution comes from an employer contribution or out-of-pocket. You can maximize the contribution limit if you are both over the age of 55 by each spouse having their own HSA. Then, your contribution limit for the family becomes $9,200. As long as at least $1,000 is deposited into each HSA, the remainder of the contribution as well as whether it was an employer contribution or out-of-pocket does not matter for tax purposes.
Your understanding is correct. About your question regarding the effects of contributions being made via payroll deduction, it doesn't matter how you make the contribution. Just when, and how much you are allowed to contribute. What makes a difference in your taxable income is how much you contribute to the HSA, with in what is allowed per person, per age and income. For example, you can't contribute more than what you earn. You can contribute an extra $1000 when you are 55 and over, etc.
If your husband is only contributing a fraction of what is allowed, and you would like to contribute more, you can make the contributions manually. You can even wait until you know what your tax liability will be and make the additional contribution by April 15, Tax Day, same as with an IRA contribution. https://www.irs.gov/pub/irs-pdf/p969.pdf
@Big0taxes wrote:
I'm a few years late to this particular thread. As I understand the replies, a non-working spouse can have her own HSA while qualifying through husband's HDHP and must share the maximum contribution limit but both can contribute an additional $1000 if over age 55.
Will the tax benefit be affected by only half being contributed by the husband through payroll deduction or will it all come out in the wash at the time of filing a tax return?
There is a slightly larger benefit for the spouse who uses payroll deductions.
To confirm your setup question, yes, as long as the spouse is covered by an HSA-eligible HDHP, and does not have other disqualifying coverage, the spouse can contribute to an HSA. The spouse does not have to be the owner of the plan, they just have to be covered. If the spouse does not have an employer sponsored plan, there are many banks that will open a private HSA, usually for a small monthly fee.
If the spouses have a family HDHP, the contribution limit is $7200 for 2021 and $7300 for 2022. This can be split in any convenient way, but not more than the combined total. Each spouse who is age 55 or older is also allowed a $1000 catch-up contribution, but this is individual and specific.
If the non-working spouse makes after-tax contributions, they will get a tax deduction on their federal and (most) state tax returns. If the working spouse makes contributions via payroll deduction, the working spouse gets a reduction in taxable income which will save the same amount of federal and state income tax as the deduction, assuming the spouses file a joint tax return. However, payroll contributions also reduce your taxable income for social security and medicare tax purposes, so payroll contributions save about 7.65% more than after-tax contributions.
Me again! THANK YOU to all who replied. I confirmed with his HSA company that I can have my own HSA for the $1000 (over 55) contribution. I will be checking with my bank to see if they offer this as that HSA company has a monthly service charge until the balance reaches $3000. His employer pays his monthly service charges.
I also found this on the IRS website for 2021 Pub 969 :
"If both spouses are 55 or older and not enrolled in Medicare, each spouse’s contribution limit is increased by the additional contribution. If both spouses meet the age requirement, the total contributions under family coverage can’t be more than $9,200. Each spouse must make the additional contribution to his or her own HSA." For 2022 that will increase to $9,300.
Again, THANK YOU!
"For example, you can't contribute more than what you earn."
To be clear, "you" would be an individual when filing single or married filing separately; and otherwise for those married filing jointly "what you earn" would be as a couple, not as an individual. Ergo, a non-working spouse who files married filing jointly may indeed contribute to his/her own individual HSA account and the couple still reap the tax benefit when filing their taxes jointly.
@awalker3 - that is consistent with what is noted above. But as @Opus 17 notes, if only one spouse is working, then the best strategy is for the working spouse to make the entire contribution* because there is no social security tax or medicare tax withheld on the contribution.
* if the non-working spouse is over 55 then that spouse has to have a separate HSA with up to a $1000 contribution to take advantage of the catch-up election.
Stated alternatively, if both are over 55 years old and the non-working spouse contributes $7300 and the working spouse has $1000 withheld from their paychecks, that is inefficient. Best to have the working spouse withhold $7300 from their paycheck (so there is no social security or medicare tax - saves about $500 in tax) and then the non-working spouse contributes to their own HSA of up to $1000. The working spouse's W-2 will reflect the $7300 contribution and then there is a $1000 deduction on the tax return to reflect the non-working spouses contribution.
Details are important, and general way(s) do not always apply/benefit/work for everyone. Note that in the event that the working spouse starts taking SocSec and by default Medicare A and so is no longer eligible to contribute to an HSA, but the couple/family remains on a qualifying high ded medical plan, then the issue of FICA tax savings is a moot point. The couple may still benefit from continued HSA eligibility via the non-working spouse and therefore may continue to fully take advantage of their enrollment in their HDP medical plan. Furthermore, there are even workarounds for lost employer HSA contributions for that spouse on SS/MCA who is now ineligible for the HSA: When/if the employer sets up an HRA for the employer to contribute to [longer explanation, specific HRA design separate from the employer’s other HRA account(s), but have seen this done successfully.]
Also, food for thought, is that saving on the FICA taxes impacts your future SocSec benefit which is based upon FICA taxable earnings…not always a desired effect, in particular for our highest earning years to be included in the SocSec benefit calculation. So, sometimes (timing is different for everyone) it behooves a couple to have the lower wage earner make the HSA contributions instead of the higher wage earner, such as when it is anticipated that the lower or no wage earner’s SocSec benefit will be less than half that of the higher wage earner’s SS benefit.
fine print: I am not a tax or financial advisor.
Since both of us are over 55 shouldn't it be:
Working spouse withhold $7300 + $1000 (over 55 add-on)
Non-working spouse contributes $1000 to own HSA
for a total of $9300?
That’s a matter of opinion and a matter of what benefits your family the most. If you want to max contribute the one requirement is that the $1,000 catch up contributions have to be via the separate individual’s HSA; but otherwise split the $7,300 between the two HSA accounts however it benefits you the most. We have staff who during their last 5-10 years of employment (e.g. their highest salaries) chose to shift contributions to their non working or lower earning spouse so that the higher earner’s FICA earnings are higher so that their SocSec benefit will be higher, so they prefer to pay the FICA tax. Note that I work in ministry so these are not 6 digit salaries.
@Big0taxes = correct
and not that I am endorsing it but I was in the same situation and used Livelyme.com for the non-working spouse as there is no administrative fee.
also - do not sign up for Medicare Part A until you lose private medical coverage from the working spouse. Once the non-working spouse sign up for Part A, the non-working spouse is not eligble to contribute to the HSA.
@Big0taxes wrote:
Since both of us are over 55 shouldn't it be:
Working spouse withhold $7300 + $1000 (over 55 add-on)
Non-working spouse contributes $1000 to own HSA
for a total of $9300?
Yes, that is allowed.
You could choose to have working spouse withhold less and non-working spouse contribute more, as long as your overall maximum is still $9300. You may forego the social security savings if the working spouse contributes less from payroll.
As suggested above, not everyone benefits from the social security savings (such as, if the working spouse earns more than $136,000). Or, there might be financial or family politics reason to make the contributions more even.