HDHP with no HSA?

[SUNRI5E]

My daughter has an HDHP for two years. She does not have an HSA. She is self-employed. Why is TT saying she has a break in coverage?

[BMcCalpin]

First, please understand that every taxpayer who enters the HSA/MSA interview gets asked the question "what type of HDHP did you have on Dec. 1, [previous tax year]? whether or not you have an HSA." Why? Because TurboTax needs to know if you had an HSA in the previous tax year and contributed to it under the "last-month" rule. This would allow you to use the full year contribution limit no matter how few months you have HDHP coverage. The catch is that you have to stay in the HDHP coverage for all of the current tax year (the "testing period") or owe additional tax and penalties.

Yes, to some taxpayers, it would make more sense if TurboTax would have asked instead "Did you have an HSA in the previous tax year?" or "Did you make any contributions to an HSA in the previous tax year?", but there is actually a good reason for this question.

Second, if you didn't have an HSA in the current tax year, then you probably didn't do the HSA interview. One of the questions in the HSA interview is which months you had HDHP coverage. Since you never saw those questions to answer them, TurboTax assumes that you don't have HDHP coverage in the current tax year. If you answer the question above as Self or Family but didn't show any coverage for the current tax year, then that is the "break" that TurboTax is talking about - but for some taxpayers it doesn't make sense because the questions don't apply to them.

Third, if, in fact, you had no HDHP coverage in the previous tax year or you had HDHP coverage for every month in the previous tax year or had HDHP coverage for every month in the current tax year, then the last-month rule and its "testing period" don't apply to you. You can safely answer "None" for the HDHP coverage on December 1st of the previous tax year, which will avoid the break message but won't harm your return.

Also, if you had no HSA in the previous tax year, then you didn't contribute to your HSA, so the last-month rule also doesn't apply to you - just answer "none" and continue your return.

[Edited 3/17/2020 4:17 pm CDT - made year neutral]

[mbtt2019]

This is indeed a big.  THe selection of whether your obamacare plan is HDHP or not is irrelevant if you did not have an HSA etc.  I am retired and buy a plan in the marketplace. IT is a high deductible plan based on the ranges indicated in turbo tax, but we had no interruption in coverage, have no HSA or other plan.  Neither I nor my spouse work.  SO I guess we choose none vs family plan.  It is a serious bug in the turbo tax software, still not fixed as of 7/10/2020