Partial Year HDHP and Max HSA Contribution Limit 2020

[Donza]

My husband and I had family HDHP coverage for the first 7 months of 2020, and I understand we must prorate the maximum allowed HSA contribution taking $7100 max times 7 and divided by 12 giving us max $4141. My question is related to we are both over 55 and are allowed the extra $1000 catch up contribution for each of our HSA's. Does that also need to be prorated for the 7 months which reduces each to $583?

[Opus 17]

Yes, the catchup must also be pro-rated.  Furthermore, if you don’t already know, HSA accounts are not joint, they are owned by individuals and the catch-up contribution is an individual limit. So, your overall family contribution limit would be about $5300, but each of your individual limits is about $4700, and the other spouse‘s catch-up contribution can only be contributed into an account in their own name.

Additionally, if you were eligible to make contributions on December 1, 2020, you can use the “last month rule“ to make a full year contribution for 2020 as long as you maintain full eligibility for all of 2021, and you don’t have to reduce your contributions due to the five months of inelligibility.  However, if you lose your eligibility anytime during 2021, you also lose your eligibility to use the last month rule and your 2020 contributions would be retroactively deemed unallowable.

[MinhT1]

Yes, catch-up contributions are also subject to the proration rule.

[Donza]

thanks for the detail, we were not eligible to make contributions in December. So I contributed $3925 to my HSA through payroll contributions JAN-JUL 2020. My husband has his own HSA and is allowed to contribute the prorated catch up contribution of $583, and it sounds like we can have him contribute the remaining additional family allowance to his HSA to reach the total allowed between the two of us, of $5307. so his total contribution would be $1382.

[Opus 17]

If I have been following the math correctly, you have $599 $799 under your family maximum, that could be contributed to either of your accounts. You must make the contribution before the new deadline for filing tax returns, which is May 17, and you must tell the HSA bank before you make the contribution that it is for 2020 and not 2021. This may require a special form or something as simple as checking the correct box when you make a contribution online.