Can You Have a Joint HSA Account With Your Spouse?

Health Savings Accounts (HSAs) provide a tax-advantaged way for individuals to save for medical expenses, making them an appealing option for many families. When managing these accounts as a couple, questions often arise about joint ownership with a spouse. Understanding how HSAs work and the regulations surrounding them is essential for couples aiming to maximize savings while staying compliant with IRS rules.

Single Ownership vs Shared Access Under IRS Rules

The IRS requires HSAs to be individually owned, prohibiting joint ownership with a spouse. Each account is tied to a single Social Security number, ensuring tax benefits and responsibilities are assigned to just one individual. However, spouses can still access HSA funds by being designated as authorized signers, enabling them to manage the account and make withdrawals. This arrangement allows families to address medical expenses without violating IRS guidelines.

If both spouses are covered by a high-deductible health plan (HDHP), they can each open an HSA. This setup permits each spouse to contribute up to the IRS’s annual limit, effectively doubling the family’s tax-advantaged savings. For 2024, the contribution caps are $3,850 for individuals and $7,750 for families, with an additional $1,000 catch-up contribution for those aged 55 and older.

Contribution Limits and Deductions

For 2024, the maximum HSA contribution is set at $3,850 for individuals and $7,750 for families. Individuals aged 55 and older can contribute an extra $1,000. These limits provide a tax-efficient way to save for medical expenses while reducing taxable income.

HSA contributions are tax-deductible, regardless of whether the account holder itemizes deductions on their tax return. For example, a family contributing the $7,750 maximum can lower their taxable income by the same amount, potentially reducing overall tax liability.

Qualified Withdrawals for Medical Expenses

HSA withdrawals are tax-free when used for qualified medical expenses as defined by the IRS. These include doctor visits, prescription medications, and certain over-the-counter drugs if prescribed. Recently, eligible expenses have expanded to include items like menstrual care products and personal protective equipment.

To avoid tax liabilities, maintaining detailed records of medical expenses paid with HSA funds is essential. This documentation ensures compliance and protects against potential IRS audits.

Tax Reporting for Each Spouse

Since HSAs are tied to individual owners, each spouse must report their contributions and withdrawals separately on their tax returns. This involves completing IRS Form 8889, which integrates with Form 1040 to detail HSA activity.

Accurate documentation of qualified medical expenses is critical. Each spouse should ensure only their respective expenses are claimed, as precise record-keeping helps maximize tax benefits and avoid discrepancies with the IRS.

Handling Excess Contributions

Exceeding IRS contribution limits results in a 6% excise tax on the excess amount for every year it remains uncorrected. To avoid this penalty, account holders must withdraw the surplus and any associated earnings before the tax filing deadline, typically April 15. The earnings on the excess are taxable and must be reported.

If the excess is not corrected in time, the IRS requires carrying it forward to the next tax year, which reduces the allowable contribution limit. For couples managing separate HSAs, careful tracking of contributions is key to avoiding complications.

Transfer or Rollover Options

HSAs offer flexibility through transfers and rollovers, which are useful when changing jobs, switching financial institutions, or consolidating accounts. Transfers involve moving funds directly between custodians without tax consequences, often to secure better terms.

Rollovers allow account holders to withdraw and redeposit funds into another HSA within 60 days. Missing this deadline results in the amount being treated as a taxable distribution, subject to income tax and a 20% penalty if the account holder is under 65. Rollovers are limited to one per 12-month period, unlike transfers.

For couples managing multiple HSAs, transfers and rollovers can streamline account management or optimize investment strategies. Transfers must remain in the same account holder’s name to preserve tax advantages and ensure compliance.