insurance

How Much Families Can Contribute to a Health Savings Account

You and a spouse can contribute a total of $6,900 to an HSA in 2018, plus a catch-up contribution if you’re 55 or older. And thanks to a quirk in the law, an adult child covered under the family’s high-deductible health policy may also be able to contribute $6,900 to his or her own HSA.

Question: I picked a high-deductible health insurance policy for 2018 that covers my whole family. How much can I contribute to an HSA in 2018? Can my wife also contribute to an HSA, or am I the only one who can make the contribution because the HSA is through my work?

Answer: Because your HSA-eligible policy covers your family, you’ll be able to contribute up to $6,900 to an HSA in 2018. People with individual coverage can contribute up to $3,450 in 2018. If you or your spouse are 55 or older, you can each contribute an extra $1,000.

When you have family coverage, you and your spouse can divide your $6,900 contribution however you’d like. You can contribute the full $6,900 to your own HSA, or you and your wife can each contribute $3,450 to your own accounts, or any variation that equals $6,900. (If you each had individual health insurance coverage rather than a family plan, you would each have a separate $3,450 limit.)

HSAs are owned individually, not jointly, but you can use the money tax-free for your own, your spouse’s and your dependents’ medical expenses—regardless of which spouse’s account you tap. Kevin Robertson, chief revenue officer at HSA Bank, which administers such accounts, says that the most common scenario is for one spouse to contribute the full amount for family coverage to his or her own account. That’s because it’s simple and most accounts are opened through an employer. Contributing to the HSA through your employer lets you use payroll deductions to make pretax HSA contributions. That gives you the added benefit of avoiding Social Security taxes on your contributions, in addition to allowing you to bypass income taxes on the money. Plus, your employer may match your contributions.

Your spouse will need to open a separate HSA, however, if he or she is 55 or older and wants to make a $1,000 catch-up contribution, says Robertson. Under the current law, each spouse can only make a catch-up contribution into his or her own account, although some of the health-reform proposals going through Congress earlier this year would have changed that rule.

Another interesting quirk of the HSA law is the contribution limit for adult children covered by a family policy. Young adults can stay on their parents’ policy until age 26. If they’re covered by an HSA-eligible family policy and aren’t tax dependents (and don’t have any other coverage that disqualifies them), they can contribute up to $6,900 apiece to their own HSAs – in addition to the $6,900 that their parents can contribute. However, because the adult child is no longer a tax dependent, the parents can’t use their HSA funds tax-free for the adult child’s eligible medical expenses; the adult child would need to use his or her own HSA funds for that, says Roy Ramthun, president of HSA Consulting Services. (Adult children who are covered by an individual policy, rather than their parents’ family policy, can only contribute up to $3,450 to their HSA for 2018.)

Most Popular

‘I Can’t Retire – I Need Health Insurance’
health insurance

‘I Can’t Retire – I Need Health Insurance’

Health insurance is seen as a huge hurdle for early retirees, but the answer to finding affordable coverage could be simpler than you think.
August 7, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The Inflation Reduction Act and Taxes: What You Should Know
Tax Breaks

The Inflation Reduction Act and Taxes: What You Should Know

The U.S. Senate has passed the Inflation Reduction Act of 2022—a climate, energy, healthcare, and tax bill that would increase IRS funding, and change…
August 8, 2022

Recommended

‘I Can’t Retire – I Need Health Insurance’
health insurance

‘I Can’t Retire – I Need Health Insurance’

Health insurance is seen as a huge hurdle for early retirees, but the answer to finding affordable coverage could be simpler than you think.
August 7, 2022
The 25 Cheapest U.S. Cities to Live In
places to live

The 25 Cheapest U.S. Cities to Live In

Take a look at our list of American cities with the lowest costs of living. Is one of the cheapest cities in the U.S. right for you?
August 7, 2022
Should You Treat Your Kids Equally in Your Will? 12 Financial Planners Weigh In
retirement

Should You Treat Your Kids Equally in Your Will? 12 Financial Planners Weigh In

What's the "fair" way to divide an estate? Many parents think they should divvy things evenly among their children ... but that can backfire. So what'…
August 1, 2022
Tax Changes and Key Amounts for the 2022 Tax Year
tax law

Tax Changes and Key Amounts for the 2022 Tax Year

Americans are facing a long list of tax changes for the 2022 tax year. Smart taxpayers will start planning for them now.
July 19, 2022