HSA Excess contribution due to marriage during year

[B93949]

Both my new wife and I have an HSA which we contributed along with our employer during the year.  My wife has a family plan with two kids and I was on a single plan.  In November, we married and I stopped my HDHP plan and suspended HSA contributions and joined her plan as of December.  Now Turbo tax is saying that we over contributed since my wife now had already  met the max contribution for the year.  Is this correct, that I will need to withdrawal the amount I contributed to my single plan that I had prior to getting married the first 11 months of the year?  Thanks for any guidance you have

Wife's contribution - $8200

Mine $4275

Both over 55

[BillM223 · Accepted solution]

No, this case is a rare exception that I don't believe TurboTax supports.

First, note that the instructions for Line 3 on page 4 for form 8889:

"4. If you were, or were considered, an eligible individual for the entire year and you changed your type of coverage during the year, enter on line 3 (see (6) in this list) the greater of: 

a. The limitation shown on the last line of the Line 3 Limitation Chart and Worksheet (in these instructions), or 

b. The maximum amount that can be contributed based on the type of HDHP coverage you had on the first day of the last month of your tax year.”

Note the underlined phrase: the GREATER of the normal coverage (if you had it all year) and your calculated coverage (if your coverage changed during the year).

There is the Line 3 Limitation Chart and Worksheet on page 4 of the 8889 Instructions (this assumes that both spouses were 55 before January 1, 2021 AND that the taxpayer switched from Self-only to Family coverage on or before November 1, 2021:

                              You                                  Spouse

January           300.00                                  600.00

February        300.00                                  600.00

March             300.00                                  600.00

April                300.00                                  600.00

May                 300.00                                   600.00

June                 300.00                                   600.00

July                  300.00                                   600.00

August            300.00                                   600.00

September     300.00                                   600.00

October          300.00                                  600.00

November                                                     600.00

December                                                      600.00

bonus            1,000.00                                 1,000.00

subtotal         4,000.00                                8,200.00

total                12,200.00

Other notes:

1. This calculation is predicated on the note on page 5 (Step 4) in the instructions for the 8889, that makes it clear that the calculations change when the marital status of the taxpayers changes.

2. You don't share any of the Family limit of $7,200 because it was all allocated to your spouse.

3. Please check my arithmetic.

This means that your excess HSA contributions are actually only $275, because you get to count most of your Self-only coverage. Note that now that you are married, you will not be able to do that going forward (like for all of 2022 and beyond).

Since TurboTax does not support this situation, it assumes that you are both maxed out to the same 7,200 plus 2 x 1,000. 

Are you using the CD/download software or the Online product? If you are using the CD/download software, you MAY be able to override the entries on the 8889 and perhaps on other forms), but I won't guarantee it. Furthermore, if you are able to do the overrides, I can't guarantee that you can still e-file.

[B93949]

Thanks for your expert advice.  I thought I should be able to count my contributions prior to marriage.

[Mike9241]

the max for a family plan for 2021 is $7,200. it doesn't matter which spouse made the contribution or how it's split between spouses. in addition each spouse that is over 55 can contribute $1,000 to their own HSA.

so your maximum 2021 contribution would be $1000 to your HSA since you have your own a/c and are over 55.

the excess must be withdrawn by the return due date or you will pay a 6% penalty. in additional and earnings on the excess must be withdrawn.

the alternative is to pay the penalty for 2021 and then under contribute in 2022 so that you and your spouse don't  exceed the max 

yes Turbotax can handle this. if you do not remove the excess form 5329 will show an excess of $3275 .

your spouse's 8889 would indicate family coverage for the whole year

your 8889 would indicate self-only for January through October and family for November and December (because you were covered by your spouse's family plan starting in November)

[jacobjheinz1]

So how to you amend the forms in Turbo tax? I filed an extension as turbo tax online could not handle it at tax time (do i I need the CD software?).   I had the same situation. I maxed out my HSA contribution for me individually ($3600) in 2021. My wife and I were married in July of 2021, she has 2 children and therefore a family plan ($7200). Although, she did not max it out. She only contributed $4200 for the year. Turbo tax was saying, at tax time, we over contributed but obviously we did not. Please let me know  how to amended the appropriate documents to reflect the right tax situation. I'm not paying a tax penalty and additional taxes on money that Turbo tax software cannot handle. Thank you for your help on this.

[Mike9241]

unless either or both of you are over 55, the combined maximum HSA contribution for 2021 was $7200 split any way you want.  you had until the due date of the return 4/18/2022 to withdraw the excess contribution and earnings thereon.  since you apparently didn't you will owe a penalty of 6% on the $600 excess contribution maybe less depending on the HSA balances on 12/31/2021 taking into account 2021 contributions made in 2022.  no amended return should be needed. the Turbotax return should have included the penalty.

the max HSA contribution for a married couple in 2022 is $7300 so with a $600 excess carryover you should limit your contributions to $6700.   contribute more and you'll be subject to an excess contribution penalty again in 2022 and every year thereafter until the excess is eliminated.

[NCperson]

as I read through this thread there are two sets of conflicting advice when a couple marries during the year - each making contributions to an HSA prior to the marriage within the tax year.

What is missing from the 'accepted solution' is this tip on the left side of Page 4 of the intructions to Form 8889:

"If you had family coverage on the first day of the last month, you do not need to use the worksheet; enter $7,200 on line 3."

The 'accepted solution' attempts to use the worksheet when the Tip states you are not do so if you had family coverage in December, which is the case in the original OP question. 

What this means is @Mike9241's approach is supportable by the Form 8889 instructions.  The limit for the family is $7200 (plus an extra $1000 for each parent who is over 55 years old). 

[NCperson]

also, it is interesting that the Form 8889 instructions do provide an example when a couple divorces during the year and how to determine the maximum contribution for each since they were 'family' early in the year and at least one was 'single' late in the year for HSA purposes

But Form 8889 does not provide an example if a couple, each with an HSA, marries during the year.  There is no reason to do so as the IRS provides the instruction in the "tip" that if "you" (meaning the joint filers) had family coverage in the last month, then don't use the worksheet, youare to just use $7200.