HSA - factoring the deduction for partial year

Forum|Forum|3 years ago
April 17, 2023
1 reply
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Hi ,

Here is my scenario. I am in family coverage HDHP plan ( me and my child) and My wife has her own insurance plan (non- HDHP part of year 2022)

2021

Me and child - full year ( hdhp family plan)

wife switched to HDHP plan (only her) Starting Sep 2021 - Aug 2022

please note both our contributions did not exceed the yearly limits.

2022

Me and child - full year ( hdhp family plan)

wife switched to NON-HDHP plan (only her) Starting Sep 2022 ( hdhp ended for august 22)

please note both our contributions did not exceed the yearly limits.

Turbotax ask question regarding her coverage HDHP in 2022 and seee coverage in HDHP lapse and calculates the new limit and raise the due amount.

Not sure why it does this since me and my child is in the family hdhp plan in 22 and we meet the limits for the family plan for the year. Turbo tax doesn't ask anything about who is included in HDHP plan

How do I resolve this issue.?

BillM223

Level 15

Did TurboTax ask your spouse why her/his HDHP coverage lapsed? If so, please read on...

Your issue is with the question that asks "What type of High Deductible Health Plan did [name] have on December 1, 2021?"

Unfortunately, the question does not clarify that it is only for a small group of taxpayers and that all other taxpayers should answer "NONE".

NOTE: each spouse can have an HSA. The use of "you" below refers to whichever spouse's name was in the question above.

This question is trying to determine if you utilized the "last-month" rule in 2021 (yes, 2021). The last-month rule lets you use the full annual HSA contribution limit if you had HDHP coverage on December 1, even if you were not covered by an HDHP for all of the year.

However, the catch is that if you used the last-month rule, the IRS requires that you stay under HDHP coverage for all of the following year (2022).

***NOTE*** This question occurs on the taxpayer who does not have an HSA, so never had a chance to tell TurboTax in the HSA interview what their HDHP coverage was for 2022.

So, the fix is this: go back to the question (at the end of the HSA interview), and:

If you had HDHP coverage for all of 2021, then enter NONE
If you had no HDHP coverage for all of 2021, then enter NONE.
If you did not have an HSA in 2021, then enter NONE.
If you had an HSA in 2021 but did not contribute to it in 2021, then enter NONE.

Only taxpayers who had their own HSA in 2021 AND who contributed to their own HSA in 2021 should answer “Family” or “Self” or “None” (which can be the right answer in some cases).

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jake2033Author

Level 2

thank for the quick reply. little confused.

my spouse had HSA from sep2021 - aug 2022.

I had my own HSA all years the included my kid.

The problem is Turbox task ask questions related to the lapse for spouse and when raise the amount due.

you had mentioned

******

So, the fix is this: go back to the question (at the end of the HSA interview), and:

If you had HDHP coverage for all of 2021, then enter NONE
If you had no HDHP coverage for all of 2021, then enter NONE.
If you did not have an HSA in 2021, then enter NONE.
If you had an HSA in 2021 but did not contribute to it in 2021, then enter NONE.

******

Even though spouse has her own HSA from sep2021- aug 2022, should I enter NONE to all the question above? my question irrespective of my spouse had HSA ,I have a family plan with my child so why is turbo tax changing the limits.

hope this explanation helps.

BillM223

Level 15

Remember that I wrote: "NOTE: each spouse can have an HSA. The use of "you" below refers to whichever spouse's name was in the question above." So the text below that point referred ONLY to your spouse.

HSAs are owned by the individual, so it makes no difference what your coverage was.

So, what HDHP coverage did your spouse have on December 1, 2021? From your post, it seems that your spouse had Family coverage (because you two shared it). So none of the possibilities I listed above are for your spouse. Therefore, your spouse should enter "Family". Then your spouse will go through a number of questions to determine how much your spouse would have been allowed to contribute without the last-month rule - because your spouse did not have HDHP coverage for all of 2021 but did have coverage on December 1, 2021, your spouse used the last-month rule such that your spouse was able to claim the full annual HSA contribution limit, but with the condition that your spouse stayed under HDHP coverage for all of 2022 (which your spouse obviously did not).

However, you may or may not have to pay a penalty, but you won't know until your spouse answers Family and completes the interview.

***

What do you mean "TurboTax is changing the limits"?

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