Skip to main content
Level 2
December 29, 2023
Question

Medicare and HSA Contribution

  • December 29, 2023
  • 9 replies
  • 63 views

For 2023 Taxes

My wife is on Medicare (for several years now) and I have entered that in TT. TT asks about her HSA contributions and when I enter her contribution amount the tax burden goes down, I.e. refund goes up.  Since contributions are not allowed once a person is on Medicare why does TT reflect a reduced tax burden?

    9 replies

    Level 15
    December 29, 2023

    I'll page @dmertz 

    Level 15
    December 29, 2023

    Your question doesn't make sense.  If your wife is contributing to an HSA while on Medicare, she is disqualified, and the contributions are not tax deductible, plus are subject to an additional 6% penalty per year.

     

    Please know that an HSA is an individual account, there are no joint HSAs.  If your wife is covered by Medicare but you have a qualifying HDHP medical plan and are not covered by Medicare, then you can contribute to an HSA in your name without any problems, but your wife can't contribute to an HSA in her name. (Your wife's Medicare does not disqualify your contributions to your own HSA.)

     

    We can't see your tax returns so we can't see what you are doing.  In the HSA section, you need to very carefully answer the question about what kind of medical insurance you have for each spouse (individual HDHP, family HDHP, Medicare, or something else).  And, you need to make sure any HSA contributions are being allocated under the name of the correct account owner.

    GastonPatAuthor
    Level 2
    December 29, 2023

    To clarify, It seems to me TT is not calculating correctly because I have marked that my wife is on Medicare. However, when I enter her contribution amount and the tax liability goes down. If her contribution are not deductible and subject to the excise tax the tax liability should go up. So, why is TT reducing the tax liability for contributions that are not deductible?

    Level 15
    December 29, 2023

    With everything entered correctly, I find it implausible that you would see a decrease in total tax liability from entering an HSA contribution for your wife.  Nothing has changed with regard to HSAs for 2023 other than the COLA adjusted dollar amounts.  Perhaps you are confusing Taxpayer and Spouse entries somehow, either entering her HSA contribution as your own or entering her Medicare coverage as your Medicare coverage.

    GastonPatAuthor
    Level 2
    December 29, 2023

    We’ll you may find it implausible, but it’s happening. And no - I’ve not confused my data with my wife's.  

    Level 15
    December 29, 2023

    Is it possible that the HSA contribution was through your wife's employer, reported with code W in box 12 of her W-2, and the increase in your AGI that results from entering the code-W amount and it needing to be treated as taxable income causes you to become eligible for an increase in some kind of tax credit, an increase that is greater than the 6% penalty on the excess HSA contribution?  Does the refund amount increase even more if you indicate that the excess HSA contribution will be returned?

     

    If the contribution is instead a personal contribution, do you see any deduction for it on Schedule 1 line 13?

     

    Compare Form 1040, Schedule 1 and Schedule 2 with and without this HSA contribution entered.