Hello all,
I have a situation regarding the last month rule ineligibility
1. I was in an HSA eligible HDHP plan by employer 1 from Sept 2023- July 30 2024. Employer 2 didnt offer an HDHP plan and hence was forced to switch out.
2. For 2023 tax year, I used the last month rule to contribute the full amount i.e. 3850$ to the HSA and claimed the benefits. Due to switching to a non HDHP plan, I was no longer an eligible individual during my testing period of Dec 2023-24. How should I approach the situation?
3. From what I understand, the prorated amount (Jan -Aug 2023) i.e.8/12*3850 = 2566.67 should be counted as an income in my tax year of 2024. Plus 10% penalty on it right? But do I need to withdraw that amount from my HSA account?
4. I should be able to contribute for prorated amounts from Jan to July 2024 in HSA i.e. 7/12*4150 = 2420. So can i just withdraw the difference 2566-2420 from HSA?
5. Also, the 2023 HSA contribution grew by 15-20%, how should I deal with that?
6. Ive read about the excise 6% tax for keeping the excess contirbution, does that apply to my case
