family HDHP for non dependent domestic partner

[SteveB9]

For the first half of 2021 I had a single HDHP plan so I was withdrawing from each paycheck to reach the HSA annual limit for singles of $3600. In August I added my domestic partner to my HDHP and so I added more funds into my HSA since there is a family annual HSA limit of $7200.  (I added the funds manually, not deducted from my paycheck.) 

I don't see where in turbotax to input that my partner was added to my HDHP, so instead of getting a tax deduction I'm actually being taxed again for the additional HSA funds that I manually added above $3600. The software seems to think I added excess HSA funds.

[Mike9241]

A major HSA benefit for domestic partners is the ability to contribute up to the annual family max in separate accounts. This is possible if neither of you is a tax dependent of the other partner. Since domestic partners are not married, they are viewed as separate tax entities. This means you can both contribute up to the family maximum to your own HSAs if both of your are covered in a family health plan, even if it is the same family health plan. That means both of you could contribute up to $7,200 for the 2021 tax year. However, you are not allowed to pay for your partner's eligible medical expenses with your HSA.

If one partner is a tax dependent of the other partner, and both are covered by a family health plan, only the partner carrying the coverage can open an HSA and only that HSA can be funded. Both partners could contribute to the annual max, currently $7,200, and the account holder could pay for the partner's eligible medical expenses with it, but the other partner could not contribute to his or her separate HSA.

you check you had family coverage all year. the last month rule (LMR) is if you had family coverage on 12/1/2021 you are deemed to have family coverage all year allowing the $7200 contribution

since you used the LMR to make the max contribution, you remain an eligible individual during the testing period as follows:

Testig  period. If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period. For the
last-month rule, the testing period begins with the last month of your tax year and ends on the last day of the
12th month following that month (for example, December 1, 2021, through December 31, 2022).
If you fail to remain an eligible individual during the testing period, for reasons other than death or becoming disabled, you will have to include in income the total contributions made to your HSA that wouldn’t have been made your income in the year in which you fail to be an eligible individual. This amount is also subject to a 10% additional tax. The income and additional tax are calculated on Form 8889, Part III.
except for the last-month rule. You include this amount in

[SteveB9]

Thanks Mike! This is very helpful.  I did have family coverage all of December.

I'm still confused with the turbotax software though.  I am not seeing where it asks if I was on an individual vs family HDHP plan.

2/7 update: Oh nevermind.  I did find where I enter the family HDHP info. So this is answered. Thanks!

[bugmenot]

Hi Mike - this is very helpful. I just want to confirm - this is for non-married (legally) and filing separately domestic partners correct? If that is the case, you can each contribute up to the max of the HSA family limit (because you're both covered by a family HDHP?

Also, if you were covered under a single plan the whole year but a family plan starting December 1 then you could contribute the max by December 31, 2022 correct?

[Opus 17]

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@bugmenot wrote:

Hi Mike - this is very helpful. I just want to confirm - this is for non-married (legally) and filing separately domestic partners correct? If that is the case, you can each contribute up to the max of the HSA family limit (because you're both covered by a family HDHP?

Also, if you were covered under a single plan the whole year but a family plan starting December 1 then you could contribute the max by December 31, 2022 correct?

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I want to go back and raise some red flags.  You may want to seek professional advice (someone you pay to guard your interests, not a random person on the internet.)

We need to separate contributions and expenses.

You can contribute to the HSA if you are enrolled in a qualifying HDHP insurance plan and have no other health coverage that would be considered disqualifying.  If you are enrolled in a family HDHP, you can contribute up to $7300 for 2022.  If you were under a single plan for 11 months and a family plan for one month, your normal limit would be $3953.  If you use the last-month rule, you can contribute the full $7300, but only if you remain on a family HDHP for all of 2023.  If you leave the family HDHP before 12/31/23, your 2022 contributions retroactively become excess and subject to a penalty.

Also, if your partner is not your tax dependent, your partner can contribute to a separate HSA in their own name if they are covered by a family plan (and have no other disqualifying health coverage), even if they are not the named insured.  Because they are not your spouse, they have a separate $7300 limit, so you could potentially combine to contribute $14,600 for 2022 under the last month rule.   However, if you get married in 2023, your limit collapses to a single shared family limit (which is $7750 for 2023).   If your partner is your dependent, they can't contribute to a separate HSA. 

Now we have to turn to spending.

You can only spend money from an HSA to cover expenses for yourself, your spouse and your dependents.  If your partner is not your tax dependent, you can't withdraw from the HSA to cover their expenses.  (Because same-sex couples can get married, the federal tax laws no longer extend spouse-type tax benefits to domestic partners.)  Thats one reason your partner might want to set up their own HSA.

[bugmenot]

Thanks. I agree professional advice is best in these situations. And I've discussed with my financial advisor who wasn't sure about it. However your advice corroborates everything I've read online and my personal interpretation of the IRS rules: https://www.irs.gov/publications/p969#en_US_2021_publink1000204049

Mainly I guess I was just looking for some confirmation of what I'm interpreting. I appreciate your point about using the 7300 limit under the last month rule but then if I'm dropped from a family plan in 2023 then I'd have to withdraw some I take it or pay a penalty. Might just stick with the single limit for 2022 then to be safe.

[Opus 17]

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@bugmenot wrote:

Thanks. I agree professional advice is best in these situations. And I've discussed with my financial advisor who wasn't sure about it. However your advice corroborates everything I've read online and my personal interpretation of the IRS rules: https://www.irs.gov/publications/p969#en_US_2021_publink[phone number removed]

Mainly I guess I was just looking for some confirmation of what I'm interpreting. I appreciate your point about using the 7300 limit under the last month rule but then if I'm dropped from a family plan in 2023 then I'd have to withdraw some I take it or pay a penalty. Might just stick with the single limit for 2022 then to be safe.

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Well, your 2022 limit would be 11 months single plus one month family, which is $3,953 instead of the 12 month single limit which is $3650.  That won't change for your 2022 tax return even if you drop back to single coverage or lose your HDHP in 2023.

But, it you think there is a chance your insurance will change and you won't be enrolled in an eligible family HDHP for all of 2023, it would probably be best to not rely on the 12 month rule now.

Cheers. 

[plipandfirt]

Does anyone know if the HSA contribution rules for non-dependent domestic partners has changed in the past 2 years? My boyfriend and I work for the same company. My medical is covered under his HDHP family plan through our company. Our company's benefits department is addiment that I am ineligible to contribute to my HSA because the family HDHP that covers me is not my name, i.e.. in my boyfriend's name. 

[Opus 17]

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@plipandfirt wrote:

Does anyone know if the HSA contribution rules for non-dependent domestic partners has changed in the past 2 years? My boyfriend and I work for the same company. My medical is covered under his HDHP family plan through our company. Our company's benefits department is addiment that I am ineligible to contribute to my HSA because the family HDHP that covers me is not my name, i.e.. in my boyfriend's name. 

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The company is both right and wrong.  They are not required to offer the HSA as an employee benefit if you don't carry the insurance plan in your own name.  However, if you are covered by an HDHP, you can open an HSA at any private bank or broker that offers it, and make tax-deductible contributions out of pocket.  

[plipandfirt]

Thank you. This is what I told them. If they choose not to handle my deduction through their cafeteria plan then they should be transparent about this decision. Sadly, they are telling people in my situation they are not eligible to participate in an HSA at all.