HSA logistics for common law marriage.

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EnjoyIt
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Joined: Sun Dec 29, 2013 8:06 pm

HSA logistics for common law marriage.

Post by EnjoyIt » Sun May 06, 2018 1:24 pm

Here is the scenario:
Couple in common law marriage only. Filing taxes as single since US government does not recognize common law marriage. Both working spouses. 1 spouse has insurance for he both of them and the plan is HSA compliant. Other spouse has higher income and in a much higher tax bracket.

What is the best way to set up an HSA plan?
Can each spouse contribute to their own separate HSA or must they use the lower spouses income and plan?
Can they use the higher spouses income as the deduction?

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MP123
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Re: HSA logistics for common law marriage.

Post by MP123 » Sun May 06, 2018 2:04 pm

It sounds to me like you're both HSA eligible individuals and could each contribute to an HSA account.

The question is how much.

Since you apparently have family coverage but aren't married (in the eyes of the IRS) it's possible that you might both be able to contribute the full family amount of $6900 to each of your HSA accounts rather than just the single amount to each. This can happen with people that have adult children on their health plan that aren't dependents for example. In those cases both the child and parent can make a full family contribution to their respective HSA accounts since they both had family coverage and weren't married. If you were "married" then you would have a combined limit of $6900 which you could allocate between the two HSA accounts. You should probably get professional advice on this approach or maybe some other posters will weigh in on it.

mac808
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Re: HSA logistics for common law marriage.

Post by mac808 » Sun May 06, 2018 2:24 pm

EnjoyIt wrote:
Sun May 06, 2018 1:24 pm
Here is the scenario:
Couple in common law marriage only. Filing taxes as single since US government does not recognize common law marriage.
Back up for a moment. When and in what state was the common law marriage established? In almost all cases, the Feds will recognize a common law marriage if a state or local jurisdiction has recognized it as well.

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FiveK
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Re: HSA logistics for common law marriage.

Post by FiveK » Sun May 06, 2018 2:35 pm

MP123 wrote:
Sun May 06, 2018 2:04 pm
Since you apparently have family coverage but aren't married (in the eyes of the IRS) it's possible that you might both be able to contribute the full family amount of $6900 to each of your HSA accounts rather than just the single amount to each.
Agreed.

See also Microsoft Word - HSA GPS Fact Sheet - HSAs and Special Family Situations_2018 - HSA-GPS_HSAs-and-Special-Family-Situations.pdf and united states - HSA contribution max for unmarried dual family coverage under HDHPs for unofficial support. Apparently there is no official (e.g., IRS ruling) word on this issue, but reading between the lines....

EnjoyIt
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Re: HSA logistics for common law marriage.

Post by EnjoyIt » Sun May 06, 2018 3:20 pm

MP123 wrote:
Sun May 06, 2018 2:04 pm
It sounds to me like you're both HSA eligible individuals and could each contribute to an HSA account.

The question is how much.

Since you apparently have family coverage but aren't married (in the eyes of the IRS) it's possible that you might both be able to contribute the full family amount of $6900 to each of your HSA accounts rather than just the single amount to each. This can happen with people that have adult children on their health plan that aren't dependents for example. In those cases both the child and parent can make a full family contribution to their respective HSA accounts since they both had family coverage and weren't married. If you were "married" then you would have a combined limit of $6900 which you could allocate between the two HSA accounts. You should probably get professional advice on this approach or maybe some other posters will weigh in on it.
No kids and we only have one health insurance plan provided by the lower income spouse. Since we are not married but cohabitation that means we file single and therefor have a limit of 3450/person. I doubt we can do $6900 each.

EnjoyIt
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Joined: Sun Dec 29, 2013 8:06 pm

Re: HSA logistics for common law marriage.

Post by EnjoyIt » Sun May 06, 2018 3:24 pm

mac808 wrote:
Sun May 06, 2018 2:24 pm
EnjoyIt wrote:
Sun May 06, 2018 1:24 pm
Here is the scenario:
Couple in common law marriage only. Filing taxes as single since US government does not recognize common law marriage.
Back up for a moment. When and in what state was the common law marriage established? In almost all cases, the Feds will recognize a common law marriage if a state or local jurisdiction has recognized it as well.
In some states common law marriage takes affect without any legal paperwork being done. For example one only needs to say they are married and therefor common law marriage applies. For this exercise let's just assume domestic partners to eliminate any chance of confusion.

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FiveK
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Re: HSA logistics for common law marriage.

Post by FiveK » Sun May 06, 2018 3:32 pm

EnjoyIt wrote:
Sun May 06, 2018 3:20 pm
Since we are not married but cohabitation that means we file single and therefor have a limit of 3450/person. I doubt we can do $6900 each.
See 2017 Publication 969 - p969.pdf:
Family HDHP coverage is an HDHP
covering an eligible individual and at least one other indi-
vidual

Spirit Rider
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Re: HSA logistics for common law marriage.

Post by Spirit Rider » Sun May 06, 2018 4:08 pm

Following on to FiveK's post. This is possibly a loophole situation akin to adult non-dependent children covered under an HDHP. It is actually better if they are not consider married for IRS purposes as it appears because they are both filing single.

If that is true, they both can make the full family plan contribution (2018 = $6900) because:
  • They are both covered under a +1 HDHP.
  • Neither is a dependent.
  • They are not married and subject to the rules for married people.
Only the HDHP plan enrollee can make $6900 in HSA contributions through Section 125 cafeteria plan payroll deductions. The other "spouse" can open, contribute and deduct $6900 in HSA contributions.

They will both file single and select the family checkbox on Form 8889 Line 1 or answer the questions in tax software to make this happen. Tax filing status and Form 8889 Line 1 HDHP status are two totally separate things. Single filing can have family HDHPs and MFJ filing can have individual HDHPs

mac808
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Re: HSA logistics for common law marriage.

Post by mac808 » Sun May 06, 2018 4:30 pm

EnjoyIt wrote:
Sun May 06, 2018 3:24 pm
In some states common law marriage takes affect without any legal paperwork being done. For example one only needs to say they are married and therefor common law marriage applies. For this exercise let's just assume domestic partners to eliminate any chance of confusion.
There is no official paperwork for common law marriage in any state. The states that still recognize common law marriage each have their own lifestyle test that must be met (e.g. mutual verbal consent, cohabitation while resident in state, and referring to each other as husband and wife in public is enough in Texas). When I asked when this particular common law marriage was established, I was really asking when those tests would have been met (and in what state). The practical state of common law marriage is incredibly misunderstood even by most lawyers and others very familiar with other areas of law. If any state in the US considers you to be in a common law marriage, then you are married (with the exception of New Hampshire which has a weird rule for inheritance purposes only), and the IRS considers you married. You could ask - how would the IRS ever find out? (Hint, one word that starts with a D.) I feel compelled to point that out for others reading this thread. That said, you're obviously most familiar with the situation you asked about and you've said to consider it a domestic partnership instead of a common law marriage, so fair enough.
Last edited by mac808 on Sun May 06, 2018 4:39 pm, edited 2 times in total.

EnjoyIt
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Joined: Sun Dec 29, 2013 8:06 pm

Re: HSA logistics for common law marriage.

Post by EnjoyIt » Sun May 06, 2018 4:37 pm

mac808 wrote:
Sun May 06, 2018 4:30 pm
EnjoyIt wrote:
Sun May 06, 2018 3:24 pm
In some states common law marriage takes affect without any legal paperwork being done. For example one only needs to say they are married and therefor common law marriage applies. For this exercise let's just assume domestic partners to eliminate any chance of confusion.
There is no official paperwork for common law marriage in any state. Each state has a series of lifestyle tests that must be met (e.g. mutual verbal consent, cohabitation while resident in state, and referring to each other as husband and wife in public is enough in Texas). When I asked when the common law marriage was established, I was asking when those tests would have been met (and in what state). Common law marriage is incredibly misunderstood even by lawyers and others very familiar with the law. If any state in the US considers you to be in a common law marriage, then you are married (with the exception of New Hampshire which has a weird rule for inheritance purposes only), and the IRS considers you married. You could ask - how would the IRS ever find out? (Hint, it starts with a D.) I feel compelled to point that out for others reading this thread. That said, you're obviously most familiar with the situation you asked about and you've said to consider it a domestic partnership instead of a common law marriage, so fair enough.
Completely understand what you are saying and thank you for the clarification. Just to clear things up, we do not represent ourselves as married in any official sense and function as domiciled together. We have been filing single for several years now and will continue to do so of the foreseeable future.

EnjoyIt
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Joined: Sun Dec 29, 2013 8:06 pm

Re: HSA logistics for common law marriage.

Post by EnjoyIt » Sun May 06, 2018 4:39 pm

FiveK wrote:
Sun May 06, 2018 3:32 pm
EnjoyIt wrote:
Sun May 06, 2018 3:20 pm
Since we are not married but cohabitation that means we file single and therefor have a limit of 3450/person. I doubt we can do $6900 each.
See 2017 Publication 969 - p969.pdf:
Family HDHP coverage is an HDHP
covering an eligible individual and at least one other indi-
vidual
This is just awesome. Thank you. You just saved us $2,500+ in taxes every year :)
Spirit Rider wrote:
Sun May 06, 2018 4:08 pm
Following on to FiveK's post. This is possibly a loophole situation akin to adult non-dependent children covered under an HDHP. It is actually better if they are not consider married for IRS purposes as it appears because they are both filing single.

If that is true, they both can make the full family plan contribution (2018 = $6900) because:
  • They are both covered under a +1 HDHP.
  • Neither is a dependent.
  • They are not married and subject to the rules for married people.
Only the HDHP plan enrollee can make $6900 in HSA contributions through Section 125 cafeteria plan payroll deductions. The other "spouse" can open, contribute and deduct $6900 in HSA contributions.

They will both file single and select the family checkbox on Form 8889 Line 1 or answer the questions in tax software to make this happen. Tax filing status and Form 8889 Line 1 HDHP status are two totally separate things. Single filing can have family HDHPs and MFJ filing can have individual HDHPs
This is great information. Thanks.

Traveler
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Joined: Fri Aug 30, 2013 9:07 pm

Re: HSA logistics for common law marriage.

Post by Traveler » Sun May 06, 2018 7:08 pm

I wish laws were made with rational thought. Why is that I, being truly single, can't contribute more than $3450 but this couple who isn't actually married can contribute $13,800? Things like this, file and suspend SS and the rule that someone who was married for 10 years but is now divorced can take the greater of half of the former spouse's or their own full SS, irritate me to no end.

Spirit Rider
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Joined: Fri Mar 02, 2007 2:39 pm

Re: HSA logistics for common law marriage.

Post by Spirit Rider » Sun May 06, 2018 7:31 pm

In many cases including this one it isn't that rational thought wasn't used, just not analysis of all possibilities. In the case of adult non-dependent children HSA contributions, the original law was fine. It was an unintended consequence of an Obamacare change. In the OP's case it was the failure of the original law to consider that two non-married individuals could be covered under a family HDHP. Domestic partners also have this loophole.

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