2021 tax year. On HDHP for me/spouse - family. In June, husband goes on Medicare and moving to an individual HDHP. What is total contribution to HSA in 2021 together?

[DaveF1006]

According to this link from IRS.gov., for 2020, if you have self-only HDHP coverage, you can contribute up to $3,550. If you have family HDHP cover- age, you can contribute up to $7,100. 

[Opus 17 · Accepted solution]

Let's go back to 2020 first. 

Assuming you are both over age 55, your overall limit on a family HDHP, ignoring medicare, is $7100 plus a $1000 catch-up provision for each of you.  The catch-up provision can only be put into an account in the person's own name--each HSA has only one owner.  If you have a family HDHP and your spouse has no disqualifying coverage, your spouse can also have an HSA, although they may have to open a private HSA at a bank if their employer does not offer one.  So for 2020, your overall limit is $9100, but only $8100 in your account or your spouse's account because the $7100 can be split any way you like but the $1000 can only go in each person's specific account.  If you did not know about the spouse catch-up, you can still make a retroactive contribution for 2020, up to April 15, 2021, although you have to let the bank know in advance that it is a directed 2020 contribution.

Then for 2021,

Your spouse's contribution limit is ($7200 + $1000)/12 = $683/month x 5 months = $3416.

Your contribution limit is ($7200 + $1000)/12 = $683/month x 5 months = $3416 + ($3600 + $1000)/12 = $383/month x 7 months = $2683 = $6099 total.

Your overall family contribution limit will be $6099 (your limit) plus $416 (5 months worth of your spouse's $1000 catch-up) = $6515.  But you can't contribute more than your individual limit, your spouse's catch-up has to be contributed to an account in your spouse's name.

[gh85renn]

Thanks, CHAMP:

Your answer was the closet to what I thought I could do for 2021. However, Per the 2020 Publication 969... page 7 - "A qualified HSA funding distribution may be made from your traditional IRA to your HSA. ......... "The maximum qualified HSA funding distribution depends on the HDHP coverage (self-only or family) you have on the first day of the month in which the contribution is made and your age as of the end of the tax year.  The distribution must be made directly by the trustee of the IRA to the trustree of the HSA......................"You can make only one qualified HSA funding distribution during your lifetime.

This is my scenario for  2021 and want to make the one time contribution as much as possible:  HSA account is in my name. Only one account.  Insurance and HSA is in my name and I currently have family HDHP insurance.  My husband will go off my insurance in June (65) and move to Medicare.  I will move to individual HDHP insurance in June.  I will be 63 in December of this year.  If I'm reading correctly - for 2021 - Since HSA is in my name - and as of this date/month (March, 2021) I have family HDHP - I can transfer $8,200 from my IRA to my HSA, with zero tax impact (Family Max including $1000 catch-up).  Is this a true statement for tax year 2021?  I don't want to contribute too much and cause tax consequences.  

Thank You!

[Opus 17 · Accepted solution]

Unfortunately, while you could make a qualified distribution from your IRA of up to $8100 and it would be reflected on the 1099-R from your IRA as a non-taxable transaction, your overall contribution limit to the HSA is still what I calculated, and the amount over $6099 would be considered an excess contribution. You would have to remove it before the filing deadline or pay income tax plus a 6% penalty on the excess. You can review the calculations on form 8889 to confirm that this is how it will be calculated.

[gh85renn]

Thank you, Opus 17:

It's all so confusing.  $6,100 was my 'assumption' before I started asking all the questions.  LOL.  Thank You so much.  I'm good to go!  I was getting different answers from different sources.  Have a Great Day!

[Opus 17]

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@gh85renn wrote:

Thank you, Opus 17:

It's all so confusing.  $6,100 was my 'assumption' before I started asking all the questions.  LOL.  Thank You so much.  I'm good to go!  I was getting different answers from different sources.  Have a Great Day!

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You have to look at this as two different transactions with different rules.  One transaction takes money out of the the IRA, and the other transaction puts money into the HSA.  Under the IRA rules, you can take $8100 out, but under the HSA rules, anything more than $6099 will be excess by the time the end of the year rolls around, under the facts as you state them. 

I should also mention that $8100 would be your allowable contribution to the HSA if you did not change your HDHP.  If you kept your spouse covered under a family HDHP (where presumably, the HDHP might provide coverage in the gaps that Medicare does not) then your limit will still be $8100.  Your limit is not affected by your spouse's secondary coverage, although your spouse's HSA limit certainly is affected by their secondary coverage.  Presumably, you save more money by switching to a single HDHP than you would benefit from a maximum HSA contribution.