HSA Contribution to a partial year HDHP

[Topangamama]

My family and I had a HDHP until June 1, 2024 when we switched another plan through my employer.  Can I still contribute prorated amounts to my HSA for the 5 months I was covered in 2024, even if we are no longer enrolled in a HDHP?  My husband and I are both over 55.

[Bsch4477]

Yes, your contribution will be prorated according to the number of months you were covered under the HDHP. 

[NCperson · Accepted solution]

you can contribute 5/12 of $9300 to your family HSA and your spouse can contribute 5/12 of $1000 to his HSA.  the contributions need to occur prior to April 15, 2025

[dmertz]

The replies above assume that you meant to say that you became ineligible on June 1, 2024 rather than June 1, 2023.

[Topangamama]

Thanks for catching that, I meant June 1, 2024.

[Topangamama]

Thanks for your reply.  We had a family HDHP from June 2023-May 2024 before obtaining health insurance through my employer.  I contributed $5687 in 2023 and $3875 in 2024 for first 5 months (we are both over 55.)  Now TT is stating that $583 of income must be included in our return this year because of the last-month rule.  Is this correct?

[BillM223]

Topangamama

You hit the "Failure to maintain HDHD coverage" trap.

If you use the last-month rule in one year, you are required to keep HDHP coverage for the entire next year. The last-month rule is, I guess I should add, the rule that allows you to use the full annual HSA contribution limit, based on whatever HDHP policy type you had on December 1st of the tax year.

It looks like you had Family HDHP coverage on December 1, 2023, so you were able to use the full annual HSA contribution limit of $7,750 (I assume that you were not 55+), even though you had HDHP coverage for only 7 months in 2023.

However, you did not keep HDHP coverage for the entire year of 2024 (only 5 months).

So when TurboTax discovers this, it leads you into a series of questions that most taxpayers don't see, asking about your 2023 HDHP coverage and your HDHP contributions, to calculate what your limit SHOULD have been without the last-month rule. Then lines 18 to 21 on form 8889 are completed and added to your income.

You can read all about this in the 8889 Instructions.

I did a quick pass at it and came up with a slightly higher number, but, yes, you will be dinged for the Failure to Maintain HDHP Coverage as a result of the last month rule.

@Topangamama