Is Turbotax's HSA contribution limit calculation for partial year coverage broken?

[woodward-apart]

I think it is just Turbotax that is broken - but if not, I'd love to contribute more!

If I select no HDHP coverage for the beginning of the year (say jan - july) and then family HDHP coverage for the rest of the year (aug-dec), Turbotax is claiming I have the entire $6900 limit.

(However, if I reverse the scenario, it is prorated - i.e. $2875)

I don't believe this is correct - isn't the HDHP contribution limit for family # months covered / 12 * 6900?  Is there any rule where if you start using an HDHP mid-year, you can still contribute the yearly maximum?

[AnnetteB · Accepted solution]

Yes, there is a rule called the Last-Month Rule that allows you to deduct the full yearly maximum amount to your HSA if you have HDHP coverage on December 1st of the tax year.

The catch is that you must maintain that coverage until the following December 1st. 

So, with that rule in place, you can contribute up to $6900 to your HSA for a family HDHP plan for 2018. 

[woodward-apart]

Wow, thanks so much for the quick answer! It certainly pays to do your taxes early and learn about these special rules. 🙂

[AnnetteB]

You're welcome.  You have until the due date of the return to make that additional contribution to your HSA.  Don't forget to include it in your tax return because the contribution you make outside of payroll deductions will be an adjustment on your return since it will be done with after-tax funds.