@thecovert wrote:
Just to clarify some details: for the first half of 2024, my wife was on my health plan. For the second half of the year, in August, she got a new job so we removed her from my health plan since she got health insurance through her new company. Since I had my account setup to autopay, we contributed the full family amount to the HSA plan in my name for 2024.
Now that I have some time, let me answer more fully without waiting for your answer.
If you did not downgrade your coverage to single, and kept a family plan, then you can use the family limit to contribute to your account even though your spouse also has other coverage. What counts is your coverage. Your contribution limit would be $8300 for 2024 and $8550 for 2025.
If you did downgrade your coverage to a single HDHP, your contribution limit is reduced. Your contribution limit is determined month by month, based on your insurance coverage on the first day of each month.
For this answer I will assume that your wife started her new job in August 2024 and you downgraded your coverage effective September 1. That means your limit for 2024 was 8/12ths of the family limit plus 4/12ths of the single limit.
That's $8300 ÷ 12 = $691.66 per month x 8 month = $5533, plus $4150 ÷ 12 =$345.83 per month x 4 months = $1383, for a total 2024 limit of $6916.
If you contributed the full $8300, you have an excess contribution of $1384. It is too late to use the special "removal of excess contribution" procedure. You must file an amended tax return for 2024, declare the excess contribution, and pay a 6% penalty. You also lose the tax deduction on the $1384, so you will pay some extra income tax besides the penalty. When asked if you had qualifying insurance all year, answer NO, then check the boxes for family HDHP for the months you were covered by a family plan and check the box for single HDHP for the months you were covered by a single HDHP. Turbotax will calculate the excess and assess the penalty.
Then for 2025, your contribution limit with single coverage is $4300. Because you have an excess of $1384, what you want to do is reduce your 2025 contribution to $2916. That way, you can "use up" the excess from 2024 by applying it to your 2025 limit.
So you need to look at your 2025 contributions and remove everything except $2916. (If you contributed $8550, remove $5634. Contact the HSA bank and ask for a special procedure to remove excess contributions, this is not a regular withdrawal. You must also withdraw any interest earned on the excess contribution, the bank will do this for you. You have until April 15, 2026 to remove the excess. If you perform the removal before Dec 31, 2025, you should get a statement showing the earnings as taxable income that you will include on your tax return. If you perform the removal after January 1, the attributed interest is still taxable on your 2025 return, because that's when the contributions were made. You will manually add the interest income to your tax return.
Then going forward, this will clear the excess, you won't pay a penalty, and you can contribute $4400 for 2026.
