A Health Savings Account (HSA) is a type of savings account that allows you to save money on a pre-tax basis to pay for qualified medical expenses. To be eligible to contribute to an HSA, you must be covered by a High Deductible Health Plan (HDHP).
Even though an HSA is an individual account and cannot be jointly shared with spouses, HSA account balances, like any other financial account, may be divided between the spouses. Here are some things you should know about your HSA if you are divorcing.
Reimbursement of eligible expenses post-divorce
Once a divorce is finalized, you cannot reimburse eligible medical expenses for your former spouse tax-free. This is true even if there is a court order saying you must pay for health care expenses of your former spouse or if your former spouse stays on your health care plan for a certain amount of time. However, if you have children with your ex-spouse, the use of your family HSA plan is unaffected by divorce, even if only one of you now claims the child as a tax dependent. Either of you can generally use your contributions to pay for a child's medical costs if the child is a tax dependent.
Divorce as a qualifying event
Divorce is a qualifying event to make plan changes, so you do not have to wait until open enrollment to make changes. After a divorce, you may wish to switch your health care coverage and your HSA from an individual plan to a family plan, or vice versa, depending on the coverage you will need in your new situation.
HSA contributions are part of gross income
Like pre-tax 401(k) plan contributions, HSA contributions are not taxable income so they will not be reported on Line 1 of IRS Form 1040, US Individual Income Tax Return. They should, however, be reported in Box 12 of your W-2. Many employers who offer HSAs also offer cafeteria plans and cafeteria plan contributions are not reported on Form 1040 OR the W-2. It is important to look at more than the income tax return and W-2 when determining income for your spouse. You should ask for and look at the final paystub for the previous year so that all gross income is counted for purposes of child support and spousal support.
