My daughter, age 23, (and under age 24 at the end of this year), finished school in Dec of last year while living at my home. I am retired and my retiree health insurance does not allow her to remain on my health plan once she is out of school. My Ex-spouse, her mother, agreed to put her on her high deductible health plan (HDHP) if I would pay the extra $200 per month that it cost her. She signed up for the family plan Jan 1, which it appeared would allow each of them to independently put up to $7000 into their own HSA account.
We assumed and planned that my daughter would get a job in another state and be independent, and therefore not be able to be claimed as an exemption.
My daughter continued to study for her medical “Board exams” while working remotely, doing mainly video editing. Her employer, in another state (her older sister actually) was happy to contribute all her earnings into the HSA account. Unfortunately my daughter has had numerous illnesses over the past 9 months. Her employer has so far contributed $3400 into the HSA account and now it is September and there is $2 left currently in it. The money has all been spent on qualifying expenses. It is doubtful that my daughter will be able to earn much more this year as she just got over pneumonia and was told she could not travel more than 1 hour trips for the next 6 months. (So much for moving across the country for work.) She continues to work remotely from home.
Now the problem. According to 2018 IRS Pub 969 in order to qualify for an HSA “You can’t be claimed as a dependent on someone else’s 2018 tax return”. (This will likely be true in also 2019.) She has been living at my home and I have contributed more than 50% of her support, so I can claim her as a dependent.
The complications of the medical industry and the insurance industry are complicated even more by the complications of the IRS.
Now what? I have a few months before the EOY to figure out if I can correct this or adapt in any way. Any suggestions? Do I need to make sure her earnings/contributions are over $4150? Or is this excluded from gross income? “Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.”
Do either of the following apply?
• Any excess contributions remaining at the end of a tax year are subject to the excise tax
• Any person you could have claimed as a dependent on your return except :The person had gross income of $4,150 or more…