My ex & I split the kid’s uninsured med expenses 50/50 per our divorce agreement. If she pays the bills directly, can I use my HSA funds to reimburse her for my portion?

[SAM13]

If my divorce decree states that my ex-wife and I split the children's uninsured medical expenses 50/50. After insurance is processed, she pays the medical bills directly and submits a copy of the bill to me to reimburse her for 50%. Am I able to reimburse her with my HSA funds even though she directly paid the healthcare provider?

[Critter]

That is a question for the HSA plan administrator to answer ... they may not allow a third party receipt.

[SAM13]

I am moreso asking if this would be ok in nature under HSA tax rules. I can always reimburse my ex-wife with regular funds and reimburse myself with HSA funds for the purpose of covering my portion of the qualified medical expenses. I just didn't know if it poses an issue that she is paying the direct bill to the medical provider. I have documentation of our agreement, as well as all of the copies of medical bills. The reimbursements can be traced to the penny.

[Critter]

Qualified medical expenses.   Qualified medical expenses are those expenses that generally would qualify for the medical and dental expenses deduction. These are explained in Pub. 502, Medical and Dental Expenses.

  Also, non-prescription medicines (other than insulin) aren’t considered qualified medical expenses for HSA purposes. A medicine or drug will be a qualified medical expense for HSA purposes only if the medicine or drug:

1. Requires a prescription,

2. Is available without a prescription (an over-the-counter medicine or drug) and you get a prescription for it, or

3. Is insulin.

  For HSA purposes, expenses incurred before you establish your HSA aren’t qualified medical expenses. State law determines when an HSA is established. An HSA that is funded by amounts rolled over from an Archer MSA or another HSA is established on the date the prior account was established.  If, under the last-month rule, you are considered to be an eligible individual for the entire year for determining the contribution amount, only those expenses incurred after you actually establish your HSA are qualified medical expenses.  Qualified medical expenses are those incurred by the following persons.

1. You and your spouse.

2. All dependents you claim on your tax return.

3. Any person you could have claimed as a dependent on your return except that:

   1. The person filed a joint return,

   2. The person had gross income of $4,050 or more, or

   3. You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2016 return.

https://www.irs.gov/publications/p969/ar02.html#en_US_2016_publink1000204081

[SAM13]

Thanks for the input Critter. I did already read that section of the IRS code. It also says immediately following the section you copy/pasted
 "Tip: For this purpose, a child of parents that are divorced, separated, or living apart for the last 6 months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child exemption".

I feel comfortable with 50% of the expense being a qualified medical expense (for HSA purposes) to me (if I were to receive the bill and pay directly). I am just not sure if it is an issue that she is paying the bill directly first, and then I reimburse her. So my question being- do I have to be the one to physically pay the bill directly to the provider in order for the expense to qualify as an HSA reimbursable expense. I would think it is ok that I am reimbursing my ex, but I don't want to run into issues if I were to get audited and find out that it isn't allowed.

[Critter]

Sorry ... that portion got cut off.

[Opus 17]

For the medical expense deduction only, you can deduct medical expenses for a child who is not your dependent  due to a custody issue but otherwise qualifies. Since the HSA benefit follows the deduction rules, you can use your HSA to pay for the expenses of your child.

 It doesn't matter whether you pay her, or you pay the doctor. But, you will want copies of the bills from her to support what you are withdrawing from the account.  You will also need copies of the insurance statements because there are often insurance adjustments to the amount you pay. For example, a doctor might charge $200 for an office visit on paper, then when you get the insurance statement later, it says that the contractually allowed charge is $150. You might pay all or part of that $150 depending on your deductible, but you don't pay the $200.   So get the insurance statements as well as copies of the doctor bills.

[SAM13]

Thanks! That is helpful!