HSA excess contributions and interest earned!!

Forum|Forum|3 months ago
April 4, 2026
1 reply
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I am single and was covered under a HDHP with an HSA for most of 2025. I turned 65 and enrolled in Medicare Part A in October but my HDHP coverage continued as primary insurance thru the end of October; Full Medicare full coverage began November 1 (Medicare premiums and Medicare Part B did not start til November 1 and medical bills were covered by my HDHP thru the end of October). FIRST QUESTION: Am I eligible for HSA contributions for 9 months (thru September?) or 10 months (thru October?).

After retirement in October, I moved my HSA to a different bank and the account started earning interest at the new bank. SECOND QUESTION: I contributed too much to my HSA account for 2025 (all contributions were payroll deducted and reported on my W2); the excess depends on the answer to question 1, but based on 9 months eligibilty I have excess contribution of $839. ($4814 contributed, $3975 allowed) TurboTax correctly calculated that and I withdrew the amount from the "new" HSA account in March 2026. I also withdrew the $8.26 interest earned on that excess contribution. HOW, WHEN AND WHERE DO I REPORT THAT "taxable interest on excess HSA contribution"?? The "tally" sheet at the end of the HSA questions doesn't give me any way to enter or change those values.... Reading other HSA questions in this forum, it appears that I need to claim the interest in 2025 taxes, but how and where? IF I enter it under "1099-INT" with other account/investment interest....there is no 1099-INT.....so I don't know the bank information other than the name of the bank that is currently my HSA custodian. help!!

BillM223

Level 15

First Answer: 10 months.

The insurance that you have is determined on the first day of the month. So if Medicare (either Part A or Part B) began on November 1st, then you would show HDHP coverage from January through October, and Medicare or None for October and December.

Second Answer: The earnings (what you call "interest" are reported on your 2026 tax return (i.e., next year)).

If TurboTax told you that you had excess contributions of $X, then that is what you should have withdrawn as a "withdrawal of excess contributions" and asked the HSA custodian to report the earnings on the 1099-SA that they will send you.

You withdrew too much in March. However, the fix for that is more difficult than what I am going to suggest to you. Just pretend that you started Medicare in October. This would make your 9 months correct. And I am hoping that you asked for a "withdrawal of excess contributions" from the HSA custodian. This is important, because otherwise they would have sent you a "normal" distribution (distribution code '1') which you might get taxed on.

If you asked for a "withdrawal of excess contributions", then sometime before the end of January 2027 (yes, any time between now and then), you will receive a 1099-SA with the distribution code of '2'. You will enter that on your 2026 tax return. The earnings will be added to your income and the distribution will be ignored. Why ignored? Because your excess contributions made through your employer were add back to your income on your 2025 tax return, as soon as TurboTax realized that you had an excess (go look at line 8f on Schedule 1 (1040)).

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