Contributed max amount to my HSA in 2017 based on the last-minute rule (LMR). However, had only 2mo HDHP coverage in 2018, thus failing the LMR. Now I need to report majority of 2017 contribution as income. Do I need to remove this amount from my HSA? If so, how do I proceed?
You'll need to sign in or create an account to connect with an expert.
When you enter the questions relating to 2017, TurboTax will correctly and automatically handle the re-calculation of what your 2017 annual HSA contribution limit should have been and count the computed 2017 "excess" as income in 2018 as well as add a 10% penalty.
You do not withdraw the now-excess 2017 contributions, because any amount you were eligible to contribute under the last month rule does not become a true excess contribution simply because you fail to satisfy the testing period.
You only owe income tax on the "excess" amount and a 10% recapture tax (on your 2018 tax return in this case) on the amount that you contributed that was in excess of the amount that you would have been eligible to contribute were it not for the last-month rule. No need to withdraw anything from your HSA.
When you enter the questions relating to 2017, TurboTax will correctly and automatically handle the re-calculation of what your 2017 annual HSA contribution limit should have been and count the computed 2017 "excess" as income in 2018 as well as add a 10% penalty.
You do not withdraw the now-excess 2017 contributions, because any amount you were eligible to contribute under the last month rule does not become a true excess contribution simply because you fail to satisfy the testing period.
You only owe income tax on the "excess" amount and a 10% recapture tax (on your 2018 tax return in this case) on the amount that you contributed that was in excess of the amount that you would have been eligible to contribute were it not for the last-month rule. No need to withdraw anything from your HSA.
Still have questions?
Make a postAsk questions and learn more about your taxes and finances.
simplyquigley
New Member
jjyoo92
New Member
bhJogdt
Level 2
VAer
Level 4
htb14
Returning Member
Did the information on this page answer your question?
You have clicked a link to a site outside of the TurboTax Community. By clicking "Continue", you will leave the Community and be taken to that site instead.