5

My wife has been carrying our health insurance for about two years.

She is on disability leave for the foreseeable future. Her employer continues to pay the employer portion of the medical/dental/vision insurance premiums, we have to send them a check for the employee portion.

Is it acceptable to have these checks drawn from an HSA?

I'm thinking yes, because

  • these premiums (the employee portion) would normally be paid with pre-tax money via payroll deduction;
  • this answer indicates that medical insurance premiums are an eligible expense per Pub 502, and that it's acceptable to reimburse oneself for the premiums from an FSA (assuming the premium were paid with post-tax money).
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HSA rules are different in some regards than deductions allowable under Pub 502 which deals with medical expenses deductible in Schedule A of your tax return. Pub 969 governs HSA's and similar reimbursement plans, and the guidelines are as follows:

Insurance premiums. You can’t treat insurance premiums as qualified medical expenses unless the premiums are for:

-Long-term care insurance.

-Health care continuation coverage (such as coverage under COBRA).

-Health care coverage while receiving unemployment compensation under federal or state law.

-Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap).

Since your wife is still being treated like an employee for health benefits, and you are not on COBRA, thus not eligible for a deduction. You may qualify under the unemployment provision depending on the cause of her disability.

  • I'd point out that Pub 969 points the reader to Pub 502 for eligible medical expenses, so as far as qualified expenditures go that seems to be the "master list". – David Feb 28 '17 at 21:46
  • The wording seems to imply that COBRA isn't the only form of continuation coverage ... nevertheless I think you're correct that that doesn't apply here. – David Feb 28 '17 at 21:47
  • @David - pub 969 references 502 in general, but then has a specific section for insurance premiums which "overrules" anything regarding the mention of premiums in 502. That's what this answer is quoting. – TTT Feb 28 '17 at 22:54
  • @TTT What I wanted to clarify was that the Pub 502 rules apply unless overridden elsewhere. IMO that wasn't clear from the wording of the answer. I understand that there is in fact an overriding rule in place here that takes precedence. – David Mar 1 '17 at 15:56
  • I hadn't gotten around to looking at our 2016 tax paperwork. Turns out this is right on page 1 of the instructions for IRS Form 8889. Duh. – David Mar 17 '17 at 0:53

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