Question

HSA contributions for spouse of sole owner of S-corp

Forum|Forum|5 years ago
June 16, 2020
1 reply
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My husband is the sole owner of an S-corp, and I am his spouse. He owns 100% of the business, while I legally own none. For tax purposes, I'm trying to figure out if I need to add the company's HSA contributions for me (an employee) to my husband's W-2 income. I did some research online and I see conflicting information; some sites say that because I'm a spouse I should be treated as having the necessary 2%+ stock (which I don't) to be an owner and be taxed as such, but others say that because I am not an owner, my HSA contributions shouldn't be added. I'm confused! Can someone please shed some light on this for me?

A

Anonymous

(notice 2005-8) more than 2% shareholders are not eligible for pre-tax HSA contributions by their employer. Employer contributions to a more than 2% shareholder's HSA are treated as compensation and then deducted by the shareholder on his 1040. this would include HSA contributions for his spouse. the S-corp in effect gets a deduction for the HSA contributions because they are part of the shareholder's comp. now the question becomes did the S-Crop have a High Deductible Health Plan covering the shareholder and spouse (a family plan)? The premiums the S-corp paid for health insurance for the shareholder is also an addback on the W-2 as compensation and a deduction on the 1040. if it was not a family plan, there should have been no HSA contributions for the spouse.

A

AsTechAuthor

Thanks for responding. Yes, he had a high deductible health plan covering both of us. (We JUST got on medicare last year.) So you're saying that I should add the contributions for me to his W-2? (That's what I did, but I want to make sure that's right!)

A

Anonymous

yes you add them. WARNING you and your spouse can't contribute to an HSA for any month you are covered by Medicare.

per INFO 2016-0003 (modified)

Under section 223, the amount of the maximum HSA contribution deduction in the year
an individual reaches age 65 is prorated based on the number of months that the
individual is an eligible individual. In particular, the maximum contribution is based on
the number of months that the person is not enrolled in Medicare.
Assuming the taxpayers have coverage by a high deductible health plan (HDHP)
and no disqualifying coverage during 2016, for the 4 months that they have family
HDHP coverage before the wife enrolls in Medicare (starting in May). they would be allowed an HSA
contribution of $2,250 ($6,750 x 4/12) that could be divided between the couple’s HSAs
however they agree. In addition, the wife turning 65 in April would be allowed a
catch-up contribution of $333 ($1,000 x 4/12) into her HSA. The husband turns 65 in
October, assuming he continues with self-only HDHP coverage, would be allowed an
additional HSA contribution of $1,406 ($3,375 x 5/12). Also, that husband would be
allowed a catch-up contribution of $750 ($1,000 x 9/12) into his HSA.