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Using an HSA with Kids Over 18 Years Old

When a child turns 18, there are a lot of changes that begin to take place.

He or she may be heading off to college soon or starting their first job. When it comes to health insurance, it is easy for young adults to stay in the dark about coverage, cost, and benefits. Under the Affordable Care Act, young adults are eligible to be on their parents’ health insurance plan until they are 26 years old, regardless of whether they are in college, have a full-time job, or are married.

When it comes to having a young adult on a high deductible health plan (HDHP) paired with a health savings account (HSA), your clients and their employees may have questions on how to navigate the regulations to ensure that they are using an HSA correctly. While this topic can be confusing, we’re breaking down the scenarios for employees.

If your child is on your health plan and is a taxable dependent

If your child is over the age of 18, is still a taxable dependent, and is on a HDHP, you can continue to use your HSA account to pay for any eligible medical costs that they may incur. These can include back to school physicals, immunizations, sports physicals, and flu shots.

What to do with your children when they're not your tax dependent

If your child is on your health plan and is not a taxable dependent

As long as your child is under the age of 26, they can remain on your health care plan regardless of if they are married, in school, working a full-time job, or living at home.

While they are covered under your HDHP, they are not covered under your HSA if they aren’t claimed on your taxes, which means that any out of pocket expenses they incur cannot be reimbursed through the HSA of a parent.

However, the adult child can open a new HSA of their own, as long as they are on a HDHP.

Contributing to their HSA

Now that your adult child has an HSA, both the parents and the child can contribute to the account, following the maximum family coverage limits.

The owner of the account (so in this case, the child) receives the tax benefits of the account, regardless of who contributes to the account.

By opening an HSA, the child now has the ability to use those dollars toward current medical expenses or as a long-term option for future medical expenses.

You can contribute to your child's HSA
Review your options to determine the best health care choice for your grown children

Is your health plan the right plan for your child?

When your kids are young, there’s a surefire way to get them health insurance coverage: add them to your plan. But when they become adults, it’s not as simple.

They may qualify for coverage through an employer or college. They may attend school out of state and no longer be in the network reach of your plan.

Now is the time to review their health care needs and determine what is right for your family. We’ve compiled a list of questions to start the conversation in your household.

The content of this post is for informational purposes only, is general in nature, is not meant to include all health insurance plan designs and is not intended to and should not be relied upon as legal or tax advice.

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