How HRAs work for spouses and dependents

The best part is, you’re not the only one who can benefit from your HRA—many of your family members can, too. Though family members don’t receive their own monthly allowance amount, they can submit their personal expenses for reimbursement through the employee’s allowance.

In this article, we’ll go over how your spouse, children, and other tax dependents can also qualify to get tax-free reimbursements through your HRA.

Can I get reimbursed for my spouse’s eligible expenses?

If your spouse incurs a qualifying medical expense, you can have their expenses reimbursed just like you would your own expenses. However, in order to get reimbursed for a spouse's qualified expenses, the IRS requires that you and your spouse or partner are legally married at the federal level.

An HRA is a tax-advantaged benefit that’s regulated at the federal level, so unfortunately, domestic partnerships, common law marriages, or marriages that are only recognized at the state level don’t meet the requirements to allow for expenses to be reimbursed.

It’s also important to note that spouses are entitled to the same tax advantages as employees. So as long as your spouse has minimum essential coverage, they can receive all reimbursements tax-free.

What’s more, with a qualified small employer HRA (QSEHRA), employers can choose to enable employer-sponsored premium reimbursement (ESPR) that allows for reimbursement of a spouse's group health insurance plan.

So if ESPR is enabled, premiums paid toward a spouse's employer-provided group health plan can be reimbursed through their QSEHRA. However, this reimbursement will be taxable because your spouse is likely already making a payroll deduction on a pre-tax basis.

Are there special rules for spouses who each have separate HRA allowances?

Married individuals who are both eligible for an HRA should be cautious in how they submit reimbursement requests. Specifically, spouses need to ensure they aren’t being reimbursed twice for the same expense. While both spouses can submit premium reimbursement requests, the total amount reimbursed shouldn’t exceed the original cost.

For example, suppose a married couple—Taylor and Andy—are both eligible for separate HRA allowances. Taylor receives $300 from their employer and Andy receives $350. They share a family health insurance policy with a premium of $1,000 a month.

In this case, both Taylor and Andy can submit the premium for reimbursement because their combined reimbursement would be $650 (less than the total cost of $1,000). If they were to switch to a policy costing $600, they would need to coordinate their reimbursement requests so they only receive $600 every month.

To do otherwise would lead to improper reimbursement. As such, it’s very important that married couples communicate with each other on how they’ll handle HRA reimbursement requests.

Can I get reimbursed for my children’s eligible expenses?

Spouses aren’t the only family members that can get tax-free reimbursements from the employee’s HRA. Employees can also submit reimbursement requests for expenses incurred by their children, so long as they are legally claimed as dependents.

A person generally qualifies as your dependent for purposes of the medical expense deduction if the following conditions are met:

• They are your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half-sister, or a descendant of any of them (for example, your grandchild, niece, or nephew)
• Note: A legally adopted child is treated as your own child

AND also meet one of the following:

• They are under age 19 at the end of the previous year and younger than you (or your spouse if filing jointly)
• They are under age 24 at the end of the previous year, a full-time student, and younger than you (or your spouse if filing jointly)
• Any age and permanently and totally disabled
• They live with you for more than half of the year
• They don't provide over half of his or her own support for the year
• They don't file a joint return, other than to claim a refund

For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, unless the child is in the custody of one or both parents for more than half the year.

If your child is over 18 years old, they must not meet either of the following criteria:

• They received gross income of $4,200 or more in the previous year
• They filed a joint return in the previous year

Can I get reimbursed for other tax dependents' eligible expenses?

You may have someone in your household who is not your child but is a dependent that you wish to get expenses reimbursed for.

This person cannot be a qualifying child or dependent of any other taxpayer that year and you must provide over half of this dependent's support. If these two conditions are met, the dependent(s) can be one of the following:

• Brother, sister, half brother, half-sister, or a son or daughter of any of them
• Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle)
• Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law
• Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship didn't violate local law

Conclusion

With an HRA, your reimbursement benefit allows you to get reimbursed for expenses that you, your spouse, your children, or any other tax dependent incur throughout the year, making for a unique and flexible benefit that works for a variety of family situations—something a group health insurance plan simply can’t offer.

This article was originally published on April 1, 2020. It was last updated July 1, 2021.