HSA and FSA use when Married Filing Separately

[schellhammer34]

Good Afternoon, 

My wife and I live together and have two young children.  We file separately because her student loans are under an income driven plan.  The children will both be on her healthcare plan.  I have an HSA through my work and she can open a Healthcare FSA & Dependent Care FSA through her work.  

- If the children are on her health insurance is she the only one allowed to claim them as dependents?

- If she claims them as dependents can I still use my HSA to pay for their medical expenses?

Thank you in advance for your help.

[Mike9241]

since your medical bills can be paid through her Healthcare FSA you would have non-HDHP coverage

you can not contribute to an HSA in this situation. 

for you to be able to contribute to an HSA you would need to be covered by a HDHP (could be hers - the rule is if one spouse has HDHP family coverage both have HDHP family coverage) but your spouse could not contribute to a Healthcare FSA. 

with family HDHP coverage and no disqualifying coverage, the maximum family HSA contribution could be made.

[schellhammer34]

Appreciate the response.

I have an HDHP and HSA that I contribute through my work but do not claim my children as dependents, my wife does.  She does not have a Healthcare FSA set up yet.

In this scenario, am I able to pay for my children’s medical expenses with my HSA?

From what I understand you can only use a dependent care FSA on children you claim as dependents, wondering if it’s the same rule for HSAs or Healthcare FSAs?

[Mike9241]

the HSA rules 

Qualified medical expenses are those incurred by the following persons.
1. You and your spouse.
2. All dependents you claim on your tax return. so it would seem you can't pay your kid's medical expenses with your HSA
3. there are additional rules but they don't apply. 

Does she have an HDHP? if so and no FSA she can contribute to her own HSA (just make sure the total for both of you doesn't exceed the family maximum for the year).  the family max can be split any way you want. while you can't use your HSA to pay your kid's medical expenses you can use yours to pay hers and then hers can be used to pay the kids.   

have you sat down with a pro to go over your situation because married filing separately usually results in a higher tax bill due to loss of certain credits and deductions and higher tax rates which may more than offset the higher loan amount you would have to pay if filing jointly? 

[schellhammer34]

Ok understood.  Utilizing my HSA for her expenses and her account for the children seems like a good way to go.  I’ll meet with a pro and see if the numbers work out in our favor to file jointly.  Thanks again for the help!

[schellhammer34]

I have a follow up question regarding dependent care FSA.

With two children, if we MFS what if I claim one child and my wife claims the other.  Could I contribute $2,500 to a dependent care FSA for one child and my wife contribute another $2,500 to her dependent care FSA?  Or is it a max $2,500 contribution per MFS family even if we each claim a dependent? 

[Mike9241]

see this link

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/we-file-mfs-i-put-2500-in-my-dep...

note that with MFS no credit would be allowed for excess expenses.