topic IRA to HSA rollover not subject to last month rule in Deductions & credits

IRA to HSA rollover not subject to last month rule

SNX — Sun, 09 Feb 2025 21:26:37 GMT

1009 R documenting "once in a lifetime" rollover IRA to HSA at $9300.00 (max for me including $1000. catch up over 55 years and my wife) both covered by my family coverage in the month of the rollover as required by the IRS and both remained in individual HSA eligible plans for the entire year. TurboTax is saying I over-funded my HSA because I did not maintain family coverage the entire year. This would be true if the contributions were made monthly, but not true for a roll-over. I cannot over-ride this on the tax form. What to do?

Re: IRA to HSA rollover not subject to last month rule

MaryK4 — Mon, 10 Feb 2025 00:47:21 GMT

You must remain an eligible individual during the testing period. The testing period begins in the month you make the rollover and continues until the last day of the following twelfth month. If you do not remain eligible, you must include the rollover as income and pay the 10% additional tax for the early withdrawal. The amounts in the HSA would also be limited to normal contribution rules.

See Testing period rules apply.

Re: IRA to HSA rollover not subject to last month rule

SNX — Mon, 10 Feb 2025 00:52:49 GMT

Yes we both remained and still remain eligible i.e. covered by an HDHP. That is not the problem. The problem is that TurboTax applies the "last month" rule looking for family coverage in December. This qualified rollover is an exception to the "last month" rule per IRS code, meaning that as long as both family members are covered by their own individual plans for 12 months after, they only need to be covered by a family plan at the time of the rollover.

Re: IRA to HSA rollover not subject to last month rule

dmertz — Mon, 10 Feb 2025 02:52:09 GMT

Interesting that I haven't seen this come up before. I've confirmed with testing that TurboTax does not properly allow the full family contribution limit if you change from family coverage to single coverage after making the HFD.

As a workaround, indicate that you had family HDHP coverage for the entire year.

@MaryK4 , you might want to report this bug to the Product Qualify group. However, I suspect that since there is a workaround for this uncommon situation, this bug will not get much, if any, attention by the developers.

Re: IRA to HSA rollover not subject to last month rule

dmertz — Mon, 10 Feb 2025 02:55:42 GMT

Or maybe @BillM223 who handles a lot of HSA-related questions would like to report it.