Managing HSA funds and divorce: How to handle reimbursements for children's medical expenses

But wait, doesn't using HSA funds for medical expenses that someone else is partially responsible for create some kind of issue? Like if the HSA is tax advantaged and the ex-spouse is paying with post-tax dollars, isn't there some tax disconnect happening? Also, what documentation should OP keep in case of an audit?

The tax treatment actually works out fine here. When you use HSA funds, you're using pre-tax dollars for qualified medical expenses, which is always allowed. The fact that someone reimburses you part of that expense doesn't change the qualified nature of the original expense. For documentation, I recommend keeping detailed records of all medical expenses paid from your HSA, along with documentation of the reimbursements received from your ex. Save copies of receipts, canceled checks or transfer records showing the reimbursements, and notes connecting specific expenses to specific reimbursements. This creates a clear audit trail showing you only used HSA funds for your portion of qualified medical expenses.

How exactly does taxr.ai work? Do you upload your actual divorce decree and financial statements? I'm a bit cautious about sharing those kinds of documents online.

Is this actually legitimate or just another subscription service that gives generic advice you could find yourself with enough Googling? I've been burned before with "specialized" tax services.

The system uses document analysis technology to review your specific documents and provide personalized guidance. You upload the relevant portions of your divorce decree and financial statements (you can redact sensitive info like account numbers), and their system extracts the relevant tax implications. It's definitely not generic advice. After trying to Google HSA and divorce topics for weeks, I was getting nowhere because every situation is different. The analysis I received addressed my specific custody arrangement and expense splitting percentages, which generic advice couldn't do.

How does this actually work? The IRS phone lines are notoriously impossible to get through - are they somehow partnered with the IRS or something?

Sorry but this sounds like complete BS. Nobody gets through to the IRS in 15 minutes, especially during tax season. I've literally spent 3+ hours on hold multiple times this year. If this service actually worked, everyone would be using it and the IRS would shut it down.

It's not an IRS partnership - they use technology to navigate the IRS phone system for you. Basically, their system calls the IRS and waits on hold in your place. When their system detects that an agent has picked up, you get an immediate call connecting you directly to that agent. You don't have to sit there listening to hold music for hours. The service absolutely works. I was skeptical too, which is why I tried it. I expected to waste money, but I was at my wit's end after trying to call myself multiple times. They got me through in about 12 minutes when I had been trying unsuccessfully for days.

Would it be less complicated to just not use the HSA card for the kids' expenses, pay everything from a regular account, and then request reimbursement from the HSA only for your portion? That seems cleaner than paying from HSA then getting partial reimbursement.

That's actually a really smart alternative approach. By paying the full amount from your regular checking/credit card initially, you could then only request HSA reimbursement for your portion (60%) of the expenses. This would create a cleaner paper trail and eliminate any confusion about HSA funds being used for expenses that weren't technically yours. It does require having enough cash flow to pay medical expenses upfront, but it simplifies the documentation significantly. You'd still want to track everything in a spreadsheet, but there would be no commingling of HSA funds with your ex's responsibility.

Yes, you can use your HSA for your portion of your children's qualified medical expenses even if they're on your ex's insurance plan. The IRS doesn't care whose insurance plan they're on - what matters is that they're your qualified dependents for HSA purposes (which generally means you provide over half their support OR they qualify under the special rule for children of divorced parents).

This is a really important point about timing that I hadn't considered! I'm actually dealing with exactly this situation - I have several medical expenses from late 2024 that I paid with my HSA card, but my ex didn't reimburse me until this month. Should I be treating these as some kind of adjustment to my 2024 HSA distributions, or do they just affect my 2025 cash flow? I'm worried about messing up my HSA reporting on my tax return if I don't handle the timing correctly. Also, do I need to somehow notify my HSA administrator about these reimbursements, or is this just something I track personally for my own records?

You don't need to make any adjustments to your 2024 HSA distributions or notify your HSA administrator about the reimbursements. The original expenses were legitimately qualified medical expenses when you paid them in 2024, so your HSA distributions for that year are correct as reported. The reimbursements you received in 2025 are simply personal cash flow adjustments between you and your ex - they don't affect the tax treatment of your 2024 HSA distributions. Your HSA administrator only tracks money going in and out of the HSA account itself, not personal reimbursements you receive afterward. Think of it this way: In 2024, you had $X in qualified medical expenses that you paid with your HSA. The fact that your ex later reimbursed you for part of those expenses doesn't change that they were qualified when you paid them. Just keep your personal records showing which reimbursements correspond to which original expenses for your own documentation. The timing difference between expense and reimbursement is very common in divorce situations and doesn't create any special tax complications.

Your situation is actually pretty straightforward based on the principles discussed in this thread. Since your divorce decree specifies that medical expenses during your ex's week are her responsibility, when you pay for something like that antibiotic prescription and she reimburses you, you're essentially acting as a temporary payment method rather than the actual responsible party. The HSA treatment works the same way - you used HSA funds for what appeared to be a qualified medical expense at the time of payment, but since your ex reimbursed you because it was technically her responsibility under your agreement, you don't need to deposit that reimbursement back into your HSA. For tracking these "convenience" payments, I'd suggest adding a column to your spreadsheet noting whether the expense occurred during "your week" or "ex's week" according to your custody schedule. This will help distinguish between expenses that are legitimately yours (where no reimbursement should be expected) versus these situations where you're just facilitating payment for the other parent's responsibility. The key is maintaining that clear documentation trail showing the expense, the reimbursement, and the reason for the reimbursement (custody week responsibility). This way if you're ever questioned, you can demonstrate that you only used HSA funds for your actual portion of medical expenses.

This is a really important distinction that often confuses people! For HSA purposes, you can generally use your funds for your children's qualified medical expenses regardless of who claims them as tax dependents in a given year. The key factor is whether they meet the HSA definition of qualified family members, which is typically based on your relationship to them (they're your children) rather than the annual dependency exemption. The IRS has clarified that divorced parents can both potentially use their respective HSAs for the same child's medical expenses, even when only one parent claims the dependency exemption. What matters is that you're legally obligated to provide support (which your divorce decree establishes) and that the expenses are qualified medical expenses. Since your divorce decree specifies that you're responsible for 60% of medical costs regardless of the dependency claim rotation, you should be able to continue using your HSA for your portion of expenses in both even and odd years. Just make sure to maintain clear documentation showing your legal obligation to pay your share of medical expenses exists independently of the tax dependency status. However, given the complexity of this situation, you might want to get specific guidance from a tax professional or even contact the IRS directly to confirm how your particular circumstances should be handled.

@4d94b6a69c36 gave excellent advice about the HSA eligibility not being tied to who claims the tax dependency. I went through this exact situation two years ago and can confirm that you can use your HSA for your children's medical expenses regardless of the alternating dependency claims. The key document that saved me during my research was IRS Publication 969, which specifically addresses HSA eligible expenses for children of divorced parents. It clarifies that both parents can potentially use HSA funds for the same child's expenses as long as each parent is paying for legitimate medical costs they're responsible for. In your case, since your divorce decree establishes your 60% responsibility independent of who gets the dependency exemption, you should be fine continuing your current approach. I'd recommend keeping a copy of the relevant pages from your divorce decree with your HSA records to document this legal obligation. One small suggestion: consider adding a note in your expense tracking spreadsheet indicating which parent claimed the child as a dependent for each tax year. While it shouldn't affect your HSA usage, having that information readily available could be helpful if you ever need to explain your situation to the IRS or a tax professional.

This separate checking account approach is brilliant! I wish I had thought of this when I first started dealing with my post-divorce HSA situation. The mental clarity alone would have been worth it - I've spent so many nights lying awake wondering if I was accidentally misusing my HSA funds. Your method essentially creates a "neutral zone" for medical expenses that eliminates any possibility of commingling HSA funds with money that should go to your ex. Plus, having all the medical expense activity in one dedicated account would make year-end tax prep so much easier since you'd have a clean transaction history showing exactly what you paid for and what you legitimately reimbursed yourself for. I'm definitely going to set this up going forward. Do you happen to know if there are any tax implications to moving money through an intermediate account like this? I assume not since it's just changing the mechanics of payment rather than the underlying expense allocations, but wanted to check if you encountered any issues. Thanks for sharing this - it's exactly the kind of practical solution I needed to hear!

This is such an important point about the language in divorce decrees! I'm actually in the middle of finalizing my divorce right now and our attorney initially drafted it with that "reimbursement" language you mentioned. After reading your comment, I'm definitely going to ask about revising it to use "directly responsible for" language instead. It makes total sense that the IRS would view "reimbursing your ex's payments" differently than "paying your portion of shared expenses." The HSA rules are pretty clear that funds should be used for qualified medical expenses that you're responsible for, not for reimbursing someone else's expenses. Do you remember if the amendment process was complicated or expensive? I'm hoping we can just revise the language now before the decree is finalized rather than having to go back and amend it later. This seems like the kind of detail that could really matter if there's ever an audit down the road. Thanks for sharing your experience - it's exactly the kind of real-world insight that helps avoid problems before they happen!

You're absolutely right to catch this before your decree is finalized! The amendment process in my case wasn't too complicated since both my ex and I agreed it was in our mutual interest to have clearer language. Our attorneys basically filed a stipulated modification that took about 30 days to process through the court. The cost was around $800 in attorney fees, which was frustrating since it could have been avoided with better initial drafting. But that's way less expensive than potentially dealing with IRS complications later if my HSA usage had been challenged. Since you're still in the drafting phase, your attorney should be able to revise the language without any additional court filing fees - just make sure they understand the HSA implications so they draft it correctly. You might want to show them this thread or ask them to research HSA rules for divorced parents to ensure they use language that clearly establishes each parent's direct responsibility for their portion of expenses rather than a reimbursement arrangement. Good catch on reviewing this now rather than discovering the issue later like I did!