Can HSA funds be used to pay for medical expenses incurred by a child under the age of 26 and covered by the accountholder's HDHP even though the child is not claimed as a dependent on the accountholder's tax return?

It is important to differentiate between a tax dependent and medical dependent. Under federal regulation, children under the age of 26 can be covered by their parent’s medical insurance, even if they are not considered dependents for tax purposes. In this case, because the child is not a tax dependent, the tax advantaged HSA funds cannot be used for his or her medical expenses.However, if the child is not a tax dependent, this individual may meet all the requirements to open his or her own HSA. Those requirements are:

  1. Covered by a High Deductible Health Plan.
  2. Not considered a tax dependent on anyone else’s tax return.
  3. No “other” form of coverage.

Note: Because this individual is covered by a family plan (the father or mother’s medical HDHP), the child would be eligible to contribute up to the family maximum IRS Limits.

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HSAs are available to help pay for current qualified medical expenses as well as to save for future expenses, all in a tax-exempt account.

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