HSAs in Divorce: What Changes and What to Watch
A Health Savings Account (HSA) lets you set aside pre-tax dollars to pay qualified medical expenses. To contribute, you must be covered by a High Deductible Health Plan (HDHP).
Although an HSA is owned by one individual (it isn’t a joint account), the balance can be divided between spouses in a divorce—just like other financial assets. If you’re separating, keep these HSA rules in mind.
After the divorce: who can you reimburse?
Once the divorce is final, you cannot use your HSA tax-free to reimburse medical expenses for your former spouse—even if a court order says you must cover their healthcare costs or they remain on your health plan for a period of time.
If you share children, a family HSA arrangement generally continues unaffected by the divorce. Even if only one of you claims the child as a tax dependent, either parent can typically use HSA contributions to pay a dependent child’s qualified medical expenses.
Plan changes: divorce is a qualifying event
Divorce counts as a qualifying life event, so you don’t have to wait for open enrollment to adjust coverage. After the split, you can switch your health insurance (and HSA coverage) between individual and family—whichever fits your new situation.
Tax reporting: where HSA dollars show up
HSA contributions reduce taxable income—similar to pre-tax 401(k) deferrals—so they don’t appear on Line 1 of IRS Form 1040. Employer HSA contributions and salary-reduction amounts should be reported in Box 12 of your W-2.
However, many employers route HSA contributions through a cafeteria plan, and those amounts may not show on Form 1040 or the W-2. That’s why, when determining income for child support or spousal support, you should review the final year-end paystub in addition to the tax return and W-2, so all gross income is properly counted.
For help aligning health coverage, HSA usage, and support calculations with your overall settlement, FMD Wealth Advisors can coordinate the details so you don’t miss critical fine print during your divorce. Book a Free - Consultation here.
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