Marriage can bring many changes, from new living arrangements to shared responsibilities and financial planning. One often-overlooked aspect is how marriage can impact your Health Savings Account (HSA). An HSA is a tax-advantaged savings account designed to help individuals with high-deductible health plans (HDHPs) save for medical expenses. Understanding the implications of marriage on your HSA can help you make more informed financial decisions.
2024 Contribution Limits
One of the most immediate effects of getting married may be the change in your HSA contribution limit. For 2024, the contribution limits are:
- $4,150 for individuals
- $8,300 for families
If you and your spouse both have individual HSAs, you can each contribute up to the individual limit. However, if you switch to a family HSA, your combined contributions cannot exceed the family limit.
HSA Strategy
While each HSA is individually owned, marriage can lead to strategic decisions about contributions and withdrawals. You cannot combine HSAs into a single account, but you can use funds from either account to pay for qualified medical expenses for you, your spouse, and your dependents. This flexibility allows couples to maximize their tax benefits and optimize their savings. Below are some examples of common HSA scenarios (assuming all participants are under age 55).
Scenario 1:
Harvey is enrolled in an HDHP and contributes to an HSA. On June 10, 2024, he marries Wendy who is enrolled in traditional copay coverage.
- Option A: Wendy can remain enrolled in her traditional plan. And, as long as Wendy is not enrolled in a Flexible Spending Account, Harvey can remain enrolled in his HDHP and contribute up to the individual limit into his HSA.
- Option B: Harvey can add Wendy to his HDHP as of June 10, 2024. He can then prorate his annual limit of HSA contributions: six months of self-only ($345.83 monthly, or $2,075 total) and six months of family coverage ($691.66 monthly, or $4,150 total). He can contribute a total of $6,225.
Scenario 2:
Brad is enrolled in an HDHP and contributes to an HSA. On July 22, 2024, he marries Charlotte who is enrolled in a traditional copay plan and has two children, Bobby and Kendra.
- Option A: Brad can add Charlotte, Bobby, and Kendra onto his plan and prorate his annual contribution limits similar to Harvey above. Brad can reimburse tax-free all of Charlotte and her children’s qualified medical expenses incurred on or after July 22nd.
- Option B: Brad can enroll in Charlotte’s traditional copay plan. In this case, Brad is HSA-eligible for only 7 months of the year with self-only coverage. So he can contribute no more than $2,420.83. However, he can reimburse tax-free all qualified expenses that he, Charlotte or her children incur on or after July 22, until he exhausts his Health Savings Account balance – whether that’s later in 2024 or years later.
Scenario 3:
David is enrolled in a Family Coverage HDHP and he marries Sandra who is also enrolled in a Family Coverage HDHP. Both contribute the maximum to their HSAs.
- Option A: Before they were married they could each contribute up to $8,300 in 2024. However, because they’re now married the IRS says that they can contribute no more during the calendar year than the statutory maximum of $8,300, which they can split between the two accounts as they choose. Thus, they’re covering the same number of family members, but with a 50% cut in how much they can contribute in aggregate to their HSAs.
Tax Implications
HSAs offer triple tax advantages: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are also tax-free. When you get married, your combined tax situation might change. Filing jointly can potentially lower your overall tax rate, allowing you to benefit more from the tax deductions offered by HSA contributions. However, it’s crucial to ensure that you do not exceed the contribution limit. Over-contributing can result in a 6% excise tax on the excess amount. Therefore, careful planning and coordination with your spouse are essential.
Qualified Medical Expenses
One significant benefit of getting married is the expanded definition of qualified medical expenses. Once married, you can use your HSA funds to cover medical expenses for your spouse, in addition to yourself and your dependents regardless of if they are covered under your HDHP medical plan. This can include costs like doctor visits, prescriptions, dental care, and vision care, providing more flexibility and potential savings.
Long-Term Planning
HSAs are not just for short-term medical expenses; they can also be a valuable part of your long-term financial planning. After age 65, you can withdraw HSA funds for any purpose without penalty (though non-medical withdrawals will be subject to income tax). This makes HSAs a useful tool for retirement planning. When married, you and your spouse can strategize to maximize your retirement savings. For example, if one spouse is nearing retirement, you might prioritize contributing to their HSA to take advantage of catch-up contributions (an additional $1,000 per year for those 55 and older).
Conclusion
Getting married can significantly impact your Health Savings Account, offering both opportunities and challenges. By understanding contribution limits, tax implications, and strategic planning opportunities, you and your spouse can maximize the benefits of your HSAs. Proper coordination and financial planning can help ensure that your HSAs serve as a valuable tool for managing medical expenses and planning for a financially secure future.
Kristin Young, JD, PHR, SHRM-CP | Operations and Compliance Manager
