Question: Which person’s medical expenses can be reimbursed tax free under an individual’s Health Savings Account (HSA)?
Answer:
Under Code Section 223(d)(2)(A), qualified medical expenses are those incurred by the following persons:
-An individual and his or her spouse;
-All dependents that an individual claims on his or her tax return; or
-Any person an individual can claim as a dependent on his or her tax return except that:
–The person filed a joint return;
–The person has gross income of $4,300 or more for 2020; or
–An individual or his or her spouse if filing jointly, can be claimed as a dependent on someone else’s tax return.
For this purpose, a child of parents that are divorced, separated, or living apart for the last 6 months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child’s exemption.
Question: Who qualifies as a tax dependent for an individual?
Answer:
To be a tax dependent of an individual, a person must be either a “qualifying child” or a “qualifying relative.”
Under Code Section 152((c)), a qualifying child is a person who
-bears a specified relationship to the individual (relationship test);
-has the same principal place of abode as the individual for more than half of the year (residency test);
-meets certain age requirements (age test);
-has not provided more than half of his or her own support for the year (limited self-support test); and
-has not filed a joint tax return (other than only for claim of refund) with his or her spouse for the year (marital/tax filing status test).
Under Code Section 152(c)(2), to satisfy the relationship test for being a qualifying child of an individual for a taxable year, the person must be either:
-a child of the individual or a descendant of such child; or
-a brother, sister, stepbrother, or stepsister of the individual or a descendant of any such relative.
Under Code Section 152(c)(3) to satisfy the age test for being a qualifying child of an individual for a taxable year, that the person must meet certain age limitations:
-a child who is not a full-time student must be under age 19 as of the end of the calendar year in which the individual’s taxable year begins;
-a child who is a full-time student must be under age 24 as of the end of such calendar year; and
-there is no age limit for a child who is permanently and totally disabled
Under Code Section 152(d) a qualifying relative is a person:
-who bears a specified relationship to the individual (relationship test);
– whose gross income is less than a specified inflation-adjusted amount (income test) ($4,300 for 2020;
– with respect to whom the individual provides over half of the person’s support (support test); and
-who is not anyone’s qualifying child.
Under Code Section 152(d)(2), to satisfy the relationship test for being a qualifying relative of an individual for a taxable year, the person must be one of the following:
-a child of the individual or a descendant of a child of the individual;
-a brother, sister, stepbrother, or stepsister of the individual;
-the father or mother of the individual, or an ancestor of either the father or mother;
-a stepfather or stepmother;
-a son or daughter of a brother or sister of the individual;
-a brother or sister of the father or mother of the individual;
-a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law of the individual; or
-a person, other than a spouse who, for the taxable year of the individual, has the same principal place of abode as the employee and is a member of the individual’s household.
