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posted Feb 11, 2025 1:48:28 PM

How to handle HSA contributions if HSA canceled in-year

I started 2025 with a high-deductible health plan with HSA with my employer. I made HSA contributions. At the end of January, I canceled my insurance and moved onto my husband’s insurance because of a qualifying life event. Do I need to remove the HSA contributions I made with my previous HSA because by canceling that insurance plan, I technically do not qualify for an HSA for all of 2025?

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1 Replies
Level 15
Feb 11, 2025 4:29:05 PM

Because you had qualifying HDHP coverage for only January, your contribution limit is 1/12 of the annual limit that would have applied had you remained eligible the entire year.  Whatever amount was contributed beyond that 1/12 is an excess contribution that needs to be removed by requesting that the HSA custodian make an explicit return of excess contribution.

 

I assume that your HSA contributions are shown with code W in box 12 of your W-2.  After entering your W-2 and completing the entries in the HSA section of TurboTax that you had coverage for only January and no qualifying coverage for the remainder of the year, TurboTax will inform you of the amount of your excess contribution that you need to request to be returned.