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Definition of "unemployed" for HSA tax purposes

TA | December 8, 2008

Q: My fiancé is a college student without a job would we be able to use HSA money to pay for the premiums? Would that be considered unemployed?

A: Unfortunately policymakers do not appear to have had typical college students in mind when they wrote these tax rules. 

IRS Publication 969, says: "Generally, you cannot treat insurance premiums as qualified medical expenses for HSAs. You can, however, treat premiums for long-term care coverage, health care coverage while you receive unemployment benefits, or health care continuation coverage required under any federal law as qualified medical expenses for HSAs". (Our emphasis added).

College students and recently graduated young adults tend to use the much cheaper short term medical insurance so that paying for premiums and the taxation of premium expenses is not such a big deal.


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