HSA Contribution for Previous Year with a Combination of Family and Individual HDHP

[gchope2k6]

Me and my wife were covered by the same HDHP plan through my employer for the first 4 months of 2018. Then, she switched to and individual HDHP plan through her new employer, and I also switched my HDHP plan to individual. Starting 2019, we are both again under the same HDHP plan through my employer.

She did not contribute anything yet to a HSA for 2018, while I did contribute to my HSA $4600 this year for 2018 (according to TurboTax, this is the maximum I could contribute to the HSA based on the individual/family split of HDHP plans described above). According to TurboTax, my wife can contribute the rest of $2300 up to the maximum to her own HSA, but she does not have one yet...

So the question is, can she open a new HSA in her name this year (2019) and contribute the $2300 left for 2018? This seems to be the cleanest option, but ideally we would like to have a single HSA... so would it be possible instead for her to somehow contribute to my own HSA the $2300 instead of opening another HSA in her name?

[BMcCalpin · Accepted solution]

 1. Yes, she can open an HSA in her name in 2019 for 2018, because she had qualifying HDHP coverage in 2018.

2. No, she cannot contribute to your HSA, because you have already hit the maximum at $4,600, given your coverage.

3. As you note that apparently leaves $2,300 ($6,900 less $4,600, with $6,900 being the absolute maximum for a couple under 55 years of age).

4. Although she was under HDHP coverage on December 1, 2018 (thus making her eligible for the last month rule which resets the annual contribution limit for a Self policy to $3,450), she cannot contribute that full amount to her HSA, because that would excess the max Family limit of $6,900 ($4,600 + $3,450 = $8,050) for the two of you.

5. Note that when you enter your HSA coverage in TurboTax for 2018 and then add her retroactive coverage (Family for the first four months and Self for the rest of the year), that TurboTax will say for each of you that your maximum contribution is $4,600 each. This is not accurate. If you each contributed $4,600, then TurboTax on the next screen (in your spouse's HSA interview) would report an excess contribution of $2,300 - the very difference betwen your tentative contributions of $4,600 each and the maximum contribution limit of $6,900 for a couple under 55.

The forms 8889-T and 8889-S are correct (your spouse's limit is reset to $2,300).

6. In conclusion, your spouse must open her own HSA, and she should contribute no more than $2,300 to it in order to avoid excess contributions.

***NOTE*** when your spouse opens her HSA, she must make it clear to the HSA custodian that she is opening it for 2018 and the contribution is for 2018. The default by HSA custodians is to assume that contributions are for the current year (2019).

[BMcCalpin]

@dmertz this is an unusual situation. Would you please take a look and see if my reasoning is correct?

[dmertz]

Your wife is certainly eligible to contribute $2,300 to her HSA.  TurboTaxBillMc's assertion in #4 *seems* reasonable, but my question is whether your wife is eligible to contribute $3,450 under the last-month rule despite the total of the year for both spouses then exceeding $6,900, and despite TurboTax indicating a maximum $2,300 contribution by your wife.  This question has come up once or twice before here and I don't think that those involved in the discussion reached a a firm conclusion.

See the instructions for line 6 of Form 8889.  There is an example for spouses who divorce mid year where one ex-spouse maintains family coverage throughout the year, permitting a $6,900 contribution by that spouse under the last-month rule, and the other ex-spouse who switches to self-only coverage for the remainder of the year and is permitted a $3,450 contribution under the last month rule.  I know of no IRS guidance that indicates that using the last month rule in this way requires the spouses to be divorced, except that, in the case where one spouse maintains family HDHP coverage, both spouses are treated as having family HDHP coverage, so only one spouse changing to self-only coverage would be treated as no change in coverage.  But when both spouses change to self-only coverage, each spouse would be treated as having only self-only coverage.

<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i8889.pdf">https://www.irs.gov/pub/irs-pdf/i8889.pdf</a>

I'm still not entirely convinced one way or the other.  To be conservative, I suggest that your wife contribute no more than $2,300 to her HSA.

[BMcCalpin]

Thanks, dmertz!

[gchope2k6]

Thank you both for the detailed answer! This confirms what I thought, but I would have hoped there was a way to have only a single HSA instead of two... so I guess we'll use one for investments and the smaller one for short term reimbursements.