Can My Wife Use My HSA?

A health savings account, sometimes referred to as an HSA, is a specific type of tax-advantaged savings account that may be used in conjunction with a high-deductible health insurance policy to pay for certain medical expenses. HSAs were authorized as part of the 2003 Medicare bill. Account holders are permitted to use funds from their HSA accounts to pay for qualified medical expenses for family members including spouses and dependent children.

Eligibility

• Individuals must meet certain eligibility requirements before they can have an HSA. The individual must be covered by a high-deductible health plan. The Internal Revenue Service defines a high-deductible health plan as one that carries a higher deductible than is typical of traditional health plans. The minimum amount of the deductible may fluctuate from year to year. As of the 2010 tax year, the minimum deductible for an individual policy was $1,200. The account holder cannot be covered by Medicare and cannot be covered by any other health insurance plan. Individuals who are claimed as a dependent on another taxpayer's federal income tax return are not eligible to have an HSA.

Benefits

• Account holders can deduct contributions to their HSA on their federal income tax return, without the need itemize their deductions. Any income generated by funds in an HSA is free from federal income taxes, provided they are used to pay for qualified medical expenses. Funds that are not needed to pay for qualified medical expenses may remain in the account from year to year, unlike flexible spending accounts that have a use-it-or-lose-it provision.

Withdrawals

• The account holder can make tax-free withdrawals from his HSA at any time to pay for qualified medical expenses. Any medical or dental expense that meets IRS requirements for income tax deductibility will typically qualify, with the exception of payments for health insurance premiums. Qualified medical and dental expenses incurred by the account holder's wife are eligible for tax-free reimbursement from the account holder's HSA, even if his wife is not covered by a high-deductible health plan.

Considerations

• An HSA account holder may designate his wife as the beneficiary of his HSA upon his death, in which case the wife would be considered the owner of the HSA. She would be able to use the HSA as her own under the same circumstances as the original account holder. Funds that are not used to pay for medical expenses may be withdrawn after the account holder reaches 65 years of age without incurring a tax penalty, but those funds will be taxed as ordinary income.