Can You Use HSA For Other Family Members Not On My Insurance?
Understand how your HSA can cover medical expenses for qualifying family members, regardless of their insurance plan coverage.
A Health Savings Account (HSA) provides a tax-advantaged way to save and pay for qualified medical expenses. These accounts are designed to work in conjunction with a High-Deductible Health Plan (HDHP). Funds contributed to an HSA can grow tax-free, and distributions for eligible medical expenses are also tax-free.
HSA Basics and Account Holder Eligibility
To be eligible to open and contribute to an HSA, an individual must be covered under a High-Deductible Health Plan (HDHP) and generally have no other health coverage that pays for medical expenses before the HDHP deductible is met. An individual cannot be enrolled in Medicare or be claimed as a dependent on someone else’s tax return. For 2025, an HDHP must have a minimum annual deductible of $1,650 for self-only coverage or $3,300 for family coverage, with maximum out-of-pocket limits of $8,300 and $16,600, respectively.
Who Qualifies for HSA Distributions
HSA funds can be used for the qualified medical expenses of the account holder, their spouse, and any dependents as defined by the IRS for tax purposes. These individuals do not need to be covered under the HSA account holder’s specific HDHP; for instance, a spouse on a different health plan can still have their qualified medical expenses paid from the HSA holder’s account.
For a child to be a “qualifying child” dependent, they must meet several tests, including relationship (e.g., child, stepchild, foster child), age (generally under 19, or under 24 if a full-time student), residency (living with the taxpayer for over half the year), and support (not providing more than half of their own support). They also cannot file a joint tax return, unless it’s solely to claim a refund and there’s no tax liability. An adult child covered by a parent’s HDHP until age 26 can have their expenses paid from the parent’s HSA if they also qualify as a tax dependent.
If a person does not meet the “qualifying child” criteria, they might still be a “qualifying relative” dependent for HSA distribution purposes. This typically requires that the individual’s gross income is below a certain threshold (e.g., $5,200 for 2025), the taxpayer provides more than half of their total support, and they meet specific relationship or household member tests. This broadens the scope of who can benefit from an HSA, extending to various family members who may not share the same health insurance plan.
What Constitutes a Qualified Medical Expense
Qualified medical expenses for HSA purposes are defined as costs for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body. Examples include medical, dental, and vision care, prescription drugs, and certain over-the-counter medications that are prescribed.
HSA funds can also cover deductibles, copayments, and coinsurance under the HDHP. Certain insurance premiums are considered qualified, such as those for long-term care insurance (subject to limits), COBRA continuation coverage, or health coverage while receiving unemployment compensation. However, health insurance premiums for a standard health plan or Medicare supplemental policies are typically not qualified expenses. Expenses reimbursed by other insurance or programs cannot be paid for with HSA funds.
Tax Implications of HSA Usage
Distributions from an HSA are tax-free when used to pay for qualified medical expenses. This tax-free withdrawal is a significant advantage, complementing the tax-deductible contributions and tax-free growth of the account. However, using HSA funds for non-qualified expenses carries financial consequences.
If HSA funds are distributed for non-qualified expenses, the amount withdrawn becomes taxable income. These non-qualified distributions are subject to a 20% penalty tax. This penalty applies unless an exception is met, such as the account holder reaching age 65 or becoming disabled. Maintaining detailed records of all qualified medical expenses is important for substantiating tax-free withdrawals and avoiding penalties.