Can you take HSA distributions for a 25-year-old non-dependent child's expenses?

Can you take HSA distributions for a 25-year-old non-dependent child's expenses?

• A. Yes, tax-free
• B. No
• C. Only if the child is a dependent
• D. Yes, but distributions may be taxed

Answer: (B)

The key idea is that HSA distributions are tax-free only when used for qualified medical expenses of you, your spouse, or a dependent. A 25-year-old who is not your dependent does not count as a dependent for HSA purposes. So using your HSA to pay their medical bills isn’t a tax-free distribution. It would be treated as a non-qualified withdrawal, subject to ordinary income tax, and if you’re under 65, a 20% penalty would apply. In this situation, you cannot take tax-free distributions for the adult child’s expenses.

The key idea is that HSA distributions are tax-free only when used for qualified medical expenses of you, your spouse, or a dependent. A 25-year-old who is not your dependent does not count as a dependent for HSA purposes. So using your HSA to pay their medical bills isn’t a tax-free distribution. It would be treated as a non-qualified withdrawal, subject to ordinary income tax, and if you’re under 65, a 20% penalty would apply. In this situation, you cannot take tax-free distributions for the adult child’s expenses.