Excess HSA contribution when calculating 6 month lookback for Medicare

[clynnwin1]

I am 66 & 8 moths  applying for SS this month ( and with it automatically comes Medicare A). I  stopped my HSA contributions  February 2025. I understand that a 6 month lookback (to Oct. 2024) will put my 2024 HSA contributions in excess of about $656 and about $2 of interest.  Can I for a withdrawal of these amounts from my HSA account before April 15th and claim as excess when I have not actually been approved for medicare yet?  Or can I withdraw and just claim as other miscellaneous income?   Do I have to just file as is on my current 1099 and w2 and pay the penalty and excise tax for 2024?   

I also had contributions for 2025 in January 2025.  I have already used the amount of contributions for medical expenses this year.  Will I have to do file an excess again in 2025, or will the distributions cancel out the contributions since they were more than the total contributions. 

[BillM223]

I apologize but I need to update my answer to you.

The so-called 6 month look back actually works this way. It is based on when you turn 65 and when you apply.

So in your case, the Medicare benefits will be retroactively applied 6 months

1. In the 2024 HSA interview, enter that you were under Medicare the last two months of the year.

2. If you actually had an excess in 2024, withdraw as much as you can.

3. Only the amount of excess (if any) that cannot be withdrawn is carried over to 2025 and penalized 6%.

4. Since you will be on Medicare forever, the carryover will continue, because you cannot "use it up" in a future year (when you have HDHP coverage and no conflicting coverage like Medicare).

5. This means the 6% penalty will repeat each year until one of two things happens:

A, Your HSA goes to zero (the 6% penalty is actually 6% of the LESSER of the excess carryover or the value of the HSA at the end of the year)

B. You take a distribution for the amount of the excess and do NOT say that it is for qualified medical expenses. This will add the excess to income and will also add a 20% penalty - but the carryover will be gone.

5. Unfortunately, you cannot "cure" the carryover any other way.

So you need to do some calculation to see which works out better for you. If your HSA balance is low, then you probably will just continue to allow the carryovers, because the penalty will be zero when the value of the HSA is zero. But if you have a fair sum in your HSA, then you might be better off to "rip the bandage off" and do the distribution now.

Most importantly, please do NOT make any entries on your return based on how you think you need to compensate (like adding to other income). TurboTax will do all that automatically. 

The Medicare webpage states: "You can sign up for Part A any time after you turn 65. Your Part A coverage starts 6 months back fro..."

[Edited 4/10/2025 | 8:27PST]

[clynnwin1]

Thanks for your reply.  This is the first I read that FRA is used instead of age 65 even on the tax forms.  My full retirement age is 66 and 8 months which is this month that is why I plan to apply for SS.  If FRA is correct, I agree I am good.  If not, on the turbo tax forms it asks what kind of insurance I had for each month.  I had high deductible for 12 months, but should I say I had medicare too to compensate for the 6 month look back due to  me applying for SS this month?  If I do take a full withdrawal from my HSA ($656) for any excess, where do I add the little interest (approximately $2-4 --I do not have an exact figure)?  Is that under miscellaneous income or not shown on w2 or 1099 form?  

[BillM223]

Please see my corrected answer above. I apologize for confusion; I was thinking of other SS benefits.