Non-Dependent Adult Child HSA
I am seeking confirmation that our 22 year old daughter can contribute the family maximum to an HSA. Below is the background outlining how I came to this conclusion.
- According to healthcare.gov, our daughter can remain on our health insurance until the end of the year she turns 26 regardless of income, dependency or student status.
- According to the 1040 instructions, our daughter cannot be claimed as our dependent as a qualifying child because she is not a full time student and she is also not a qualifying relative because she makes too much (above $5,050 gross in 2024). With this being the case and since she is covered by our HSA eligible HDHP, according to both the From 8889 instructions and Publication 969 she is an HSA “eligible individual” able to make and deduct contributions.
- According to both the Form 8889 instructions and Publication 969, the amount that an “eligible individual” can contribute and deduct is based solely on the type of plan that is covering her (self-only HDHP or family HDHP). In our case since she is covered by our family HDHP, I believe she can contribute and deduct the full family amount………in addition to the full family amount my wife and I are able to contribute.
If anyone can confirm my conclusion that would be great…….or if anyone knows why this could not be done, an explanation as to why would be much appreciated.
Permalink Submitted by Ron Roberson on Sun, 2024-06-09 20:13
Let me start by saying the fact pattern you describe was created by the Affordable Care Act, when children were statutorily allowed to remain on their parents’ health insurance until age 26, even if not a dependent. Because HSA were introduced in 20o4, well before the AFA, such a situation was never contemplated in the HSA law. Meaning, I believe you are going to have to make a judgment call on this one.
That said, I agree with your conclusion – if your daughter is an eligible individual (based on your facts I believe she is) and she is covered under a family HDHP (again, based on your facts I believe she is), then she may deduct an HSA contribution up the the family maximum. For reference, IRC 223(b)(2)(B) states “In the case of eligible individual who has family coverage (emphasis added) under a high deductible health plan” the family coverage limit applies. Note the only criteria is having a family plan. There is nothing in the law about the plan being in the taxpayer’s name, being primary insured, or any other requirements.
Additionally, Notice 2004-50, Q. 31 makes it clear that an eligible individual is only required to have more than one person covered under the family plan. The second person is not required to be an eligible individual. In Example 1, H &W are both covered by a HDHP, making it family coverage. W is also covered by a low deductible plan so she is not an eligible individual. However, H is still allowed to make an HSA contribution subject to the family plan limits. You may also want to look at Notice 2004-2, Q 15 and the related examples. The point here is the fact that the second person’s eligibility or other status has no bearing on the H’s HSA deduction. Merely the fact that the H had more than one person covered under the HDHP permits him to make an HSA deduction subject to the family limit.
For the situation you describe, it seems this logic would apply to your daughter. She is covered by a HDHP that covers two or more people (the only criteria for making a family contribution) therefore she qualifies to contribute to an HSA at the family limit. If this isn’t allowed, I couldn’t find the reason why.