Compound It! How HSAs can benefit single moms

It's one of the first signs of spring and the first sign that school is almost out and that summer is on its way: Mother's Day.

Every year, Mother's Day cards say the same thing: how amazing, selfless and nurturing mothers are. And rightfully so - mothers give so much of themselves to raise, protect and help their children fulfill their dreams.

But being a mother is no easy feat and not something that can be summed up in a Hallmark card. It's a trying job, even more difficult if you're doing it on your own. Single mothers make up 25% of all American families and they need and deserve special consideration.

Why an HSA can help

If you have a high-deductible health insurance plan (HDHP), you're eligible for a health savings account or HSA. Contributions to an HSA are tax-deductible so every dollar you contribute will reduce your taxable income.

HSA withdrawals are also tax-free if you use them for qualified medical expenses, which include doctor's visits, prescriptions, lab work and other services and procedures. Earnings from your HSA also aren't taxed.

You can open an HSA by yourself, but your employer may also provide an HSA. Some even contribute money to your HSA as a way to encourage employees to choose qualified HDHPs.

You can pay for your own medical expenses and your child's with an HSA if you claim that child as a dependent on your taxes. If you and the other parent take turns claiming the child as a dependent, you won't be able to pay their medical expenses from your HSA if you're not claiming them that year.

However, your child doesn't have to be under your own health insurance plan. If your child has insurance through Medicaid or their other parent's health insurance, you can still pay their medical expenses with your HSA if they're otherwise eligible.

Your child has to be under your insurance plan if you want to contribute the family limit to your HSA (that's $7,000 in 2019). If your child is on a separate plan and you participate in the health plan on your own, you may only contribute the individual maximum of $3,500.

Open a DCFSA to extend the benefits

If you have an HSA, you can also open a dependent care flexible spending account (DCFSA), which works like a savings account specifically for qualified childcare expenses. You can contribute a $5,000 max amount to your DCFSA every year if you are married and file a joint or single tax return and $2,500 if you're married but filing separately.

You can use funds in a DCFSA to pay for babysitters, nannies, camp, aftercare and related expenses that allow you and your spouse to work or go to school full-time. This is only available for children below the age of 13 or adults who are your tax dependents and who live with you and physically rely on your care.


Compound It! is your update of achievable, effective, no-nonsense HSA saving and investment advice, delivered by people who make it work in their own lives. For the latest info about your health and financial wellness, be sure to check out the HSA Learning Center, and follow us on Facebook and Twitter.

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