Hsa Contributions

[Kyleazajac]

If an an independent under 26 and my parents claim me on their HDHP insurance, can I still open up an HSA and contribute?

Also, if they have a family HDPD, can I contribute $7,300 instead of $3,650??

finally, is it better for me to open up an HSA with my employer (I am under my parents plan) or should I open an account up myself? (Would the money I put in still be tax free)

THANK YOU

[RobertB4444]

If you are on your parents insurance but they do not claim you as a dependent on their tax return then you can open an individual HSA in your name (and you should because your parents are not allowed to pay for your medical expenses from their HSA if you aren't a dependent).  

But you can't open a family HSA because you are only the one you.  Sorry.

As far as should you open a plan on your own or through your employer - the money is tax free either way and the hassle is less if it's done through a payroll withdrawal and shows up on your W2.  So if everything else is equal do it through your employer.

[RobertB4444]

@Kyleazajac  I did some more reading on this and my answer above was wrong!  You CAN have a family HSA that covers just you provided you are covered as part of your parents HDHP!

[Kyleazajac]

Okay! Thank you for the response, Robert 🙂 So would I be able to contribute $7,300 for my personal 2022 family HSA? If so, are there any qualifications between the individual and family? It seems like everyone should just contribute to the family if not.

Also, I agree with it being less of a hassle to go through my employer, but what do you mean if "everything else is equal?"

The final question in regards to the employer is, would I still be able to contribute through my employer even if I am not under my employer's health plan? As I would be an independent under my parents' plan?

[BillM223]

As Robert says, you can contribute up to the maximum for Family HDHP coverage (7,300 in 2022) - this is a loophole that came into being when the ACA was updated to allow children up to the age of 26 to be on the parents' policy without being dependents, but without updating everything else that was affected.

"I agree with it being less of a hassle to go through my employer" - it's not just less of a hassle, but it will save you money. Contributions made through your employer (whether by your employer or by you using payroll deductions), not only get an exclusion on federal income tax, but also on Social Security tax and Medicare tax. This happens because the code W amount in box 12 (the HSA contributions) are removed from Wages in boxes 1, 3, and 5. 

When you make direct contributions to your HSA (not through your employer), then you still have to pay the Social Security and Medicare taxes on that amount.

"would I still be able to contribute through my employer even if I am not under my employer's health plan? " - this is a question for your employer. It's OK with the IRS either way.

[Kyleazajac]

Thank you, Bill. It was hard for me to find this information on the internet elsewhere! 

I was unclear on the differences between family and individual HSAs? Could you please elaborate? I just do not want to contribute too much and face a penalty.  

Such as how if I am single filing independent that I could contribute to the family maximum instead of the individual maximum 🙂

[AliciaP1]

No, your HSA account is either set up for "Family Coverage" or "Individual Coverage".  It does not depend on how you file your tax return, just how the account is set up.

You should be able to find how it is set up on your year-end tax documents for the account, the periodic statements, or your online access to the account.  If you still can't discover how it is set up, you should call the bank holding your HSA account to ensure you stay under the limit.

@Kyleazajac