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I just got emailed this from my HSA provider.
SIGH world.
Domestic Partners and HSAs
Our laws regarding marriage, civil unions and domestic partners continue to evolve. This email shares the current state of the law regarding how domestic partners are treated for HSA purposes.
1. Can I use my HSA to pay medical expenses of my domestic partner?
You can only use your HSA to pay for the medical expenses of your spouse or your dependents. If your domestic partner meets the IRS requirements as a dependent (IRS Code § 152), then you can use your HSA for your domestic partner's medical expenses. Meeting the definition of a "dependent" is difficult for non-children (see below). This is an area under pressure to change so contact your tax or legal adviser for more details
2. If my HDHP covers only my domestic partner and me, can I contribute the family HDHP limit?
Yes, in order to contribute the family HSA limit ($6,150 for 2011); your High Deductible Health Plan (HDHP) must cover you and at least one other person. If that other person is your domestic partner, then you have a family HDHP and you can contribute the family limit if you are otherwise eligible for an HSA.
Your domestic partner can also contribute up to the family HDHP limit, assuming your domestic partner is otherwise qualified for an HSA (including not a dependent on someone else's tax return). This is an oddity of the HSA rules for domestic partners.
Example.
Todd and Adam are domestic partners. Todd's employer provides HDHP coverage for Todd and his domestic partner. Todd enrolls in a family HDHP through his employer that covers only Todd and Adam. Todd and Adam are both otherwise eligible for an HSA. Adam is not Todd's dependent (or vice versa). Todd contributes $6,150 to his HSA for 2011. Adam also contributes $6,150 to his HSA. Combined they get $12,300 of deductions for HSA contributions. An opposite sex married couple would only get one $6,150 HSA contribution. Todd; however, cannot use his HSA to cover Adam's medical expenses and Adam cannot use his HSA to pay for Todd's expenses (whereas opposite sex married couples are able to use their HSA to cover each other's expenses).
3. Is a domestic partner a "spouse"?
No, the Defense of Marriage Act provides that domestic partners will not, for federal tax purposes, be considered each other's spouse. The "word 'spouse' refers only to a person of the opposite sex who is a husband or a wife."
1 USC § 7.
This was the one that irks me most.
4. What is a tax dependent?
For HSA purposes, the definition of "dependent" is important for two purposes: (1) you are not eligible for an HSA if you are eligible to be claimed as a dependent on someone else's tax return, and (2) and you can only use your HSA to pay for the medical expenses of yourself and your "dependents." Both of these rules refer to the same law for the definition (IRC § 152). The definitions; however, are slightly different because the second item excludes certain paragraphs of the Code. The full definition of who qualifies as a dependent is beyond the scope of this answer and can be found in the law sections cited below.
In any case, a spouse is not considered a dependent. Without covering all the details, a dependent is someone meeting the following.
Child under 19. The taxpayer's child under the age of 19 at the end of the tax year who lives at the taxpayer's residence more than half the year. Note: special rules apply for divorced or separated parents.
Student under 24. The taxpayer's child that is a student and under 24 at the end of the tax year who lives at the taxpayer's residence more than half the year.
Disabled Child. A special rule exists eliminating the age requirement for individuals who are permanently and totally disabled.
Qualifying Relative. A qualifying relative may also be a dependent and this can include "any other person" who lived with the taxpayer all year as a member of the household and for whom the taxpayer provided over half the support for the year. A qualifying relative cannot be a spouse or a qualifying child.
See IRC §§ 223(b)(6), 223(d)(2), 151, and 152. See also IRS Pub 502.
We still have so very far to go.
SIGH world.
Domestic Partners and HSAs
Our laws regarding marriage, civil unions and domestic partners continue to evolve. This email shares the current state of the law regarding how domestic partners are treated for HSA purposes.
1. Can I use my HSA to pay medical expenses of my domestic partner?
You can only use your HSA to pay for the medical expenses of your spouse or your dependents. If your domestic partner meets the IRS requirements as a dependent (IRS Code § 152), then you can use your HSA for your domestic partner's medical expenses. Meeting the definition of a "dependent" is difficult for non-children (see below). This is an area under pressure to change so contact your tax or legal adviser for more details
2. If my HDHP covers only my domestic partner and me, can I contribute the family HDHP limit?
Yes, in order to contribute the family HSA limit ($6,150 for 2011); your High Deductible Health Plan (HDHP) must cover you and at least one other person. If that other person is your domestic partner, then you have a family HDHP and you can contribute the family limit if you are otherwise eligible for an HSA.
Your domestic partner can also contribute up to the family HDHP limit, assuming your domestic partner is otherwise qualified for an HSA (including not a dependent on someone else's tax return). This is an oddity of the HSA rules for domestic partners.
Example.
Todd and Adam are domestic partners. Todd's employer provides HDHP coverage for Todd and his domestic partner. Todd enrolls in a family HDHP through his employer that covers only Todd and Adam. Todd and Adam are both otherwise eligible for an HSA. Adam is not Todd's dependent (or vice versa). Todd contributes $6,150 to his HSA for 2011. Adam also contributes $6,150 to his HSA. Combined they get $12,300 of deductions for HSA contributions. An opposite sex married couple would only get one $6,150 HSA contribution. Todd; however, cannot use his HSA to cover Adam's medical expenses and Adam cannot use his HSA to pay for Todd's expenses (whereas opposite sex married couples are able to use their HSA to cover each other's expenses).
3. Is a domestic partner a "spouse"?
No, the Defense of Marriage Act provides that domestic partners will not, for federal tax purposes, be considered each other's spouse. The "word 'spouse' refers only to a person of the opposite sex who is a husband or a wife."
1 USC § 7.
This was the one that irks me most.
4. What is a tax dependent?
For HSA purposes, the definition of "dependent" is important for two purposes: (1) you are not eligible for an HSA if you are eligible to be claimed as a dependent on someone else's tax return, and (2) and you can only use your HSA to pay for the medical expenses of yourself and your "dependents." Both of these rules refer to the same law for the definition (IRC § 152). The definitions; however, are slightly different because the second item excludes certain paragraphs of the Code. The full definition of who qualifies as a dependent is beyond the scope of this answer and can be found in the law sections cited below.
In any case, a spouse is not considered a dependent. Without covering all the details, a dependent is someone meeting the following.
Child under 19. The taxpayer's child under the age of 19 at the end of the tax year who lives at the taxpayer's residence more than half the year. Note: special rules apply for divorced or separated parents.
Student under 24. The taxpayer's child that is a student and under 24 at the end of the tax year who lives at the taxpayer's residence more than half the year.
Disabled Child. A special rule exists eliminating the age requirement for individuals who are permanently and totally disabled.
Qualifying Relative. A qualifying relative may also be a dependent and this can include "any other person" who lived with the taxpayer all year as a member of the household and for whom the taxpayer provided over half the support for the year. A qualifying relative cannot be a spouse or a qualifying child.
See IRC §§ 223(b)(6), 223(d)(2), 151, and 152. See also IRS Pub 502.
We still have so very far to go.