How can I calculate the HSA over contribution for my own HSA and my wife's HSA?

[kyhmoya]

Both husband and wife started HSA contribution in 2020 and filing tax as married jointly.

From August 4th to Nov 15th, Husband and wife covered by husband's  family HDHP.

From Nov 16th to Dec 31th, each husband and wife had their own self only HDHP.

none of them was covered by Medicare and age of them is less than 50.

Husband contributed $7100 to his HSA and wife contributed $1350.

Turbotax is saying that I had excess contribution total $4011. Is this true?

It is saying that calculated HSA contribution limit for husband is $4438. Contribution limit for wife is also $4438.

Can't the husband withdraw contribution $2262(7100-4438) and wife leave the contribution $1350?

[Opus 17]

You were never allowed to contribute $7100 plus more.  Even if you had family coverage all year, that is both your personal limit and your overall family limit.

HSA eligibility is determined on the first day of the month.  Your spouse is considered to be covered by a family HSA, even if you are the one who owns the plan, as long as she does not have disqualifying coverage.

Therefore, you and your spouse's individual eligibility for 2020 should be

August 0

Sept $591.66

Oct $591.66

Nov $591.66

Dec $295.83.

That $591 family limit applies to both spouses combined so your overall eligibility for 2020 should be $2366.64, with a maximum allowed to either spouse of $2070.81.

My math doesn't match yours, I would need to see your worksheets, which I can't do.  I suspect you reported you had coverage for August, you did not because it counts from the first of the month, but that by itself doesn't make your numbers match mine.  Did you have an HDHP at any time before August 4?

However, you can also use the last month rule.  I don't know why Turbotax is not picking this up.  Is there a question you missed?  Under the last month rule, you are deemed to have had the same coverage for the entire year as you had on December 1, provided that you maintain that same coverage for all of the next year (2021).  So if you use the last month rule, you and your spouse could each contribute $3550 for 2020, because you each had separate self-only HDHPs on December 1, 2020.

That still gives you an over contribution of $3550 to your account, which you must withdraw before April 15 to avoid a penalty.  This is not a normal withdrawal, it is a return of excess contributions, which may require a special form from the bank.  The money will be added back to your taxable income.

However, you could deposit up to $2200 into your wife's account and take a tax deduction.  You can make a deposit that is designated for 2020, up until April 15, 2021, as long as you tell the bank in advance (there should be a selection on the web site if you do it online.)

I don't get where you see $4011, but these are the numbers as I calculate them.

@dmertz 

[kyhmoya]

I believe Turbotax picked up Last month rule weirdly.  Since I was covered by self only HDHP on Dec 1st, it added 3550, then for the Sep, Oct, Nov that I was on family HDHP,  added 295.93 x 3.  So the contribution limit became $4438. But it did not count anything from my wife's contribution. 

So contribution from me (7100) + contribution from my wife (1350) - $4438 = 4012(4011). 

[BillM223]

I believe that the taxpayer is referring to the calculation in the middle of the HSA interview, not anything printed on form 8889. This calculation calculates the HSA contribution limit for each spouse independent of each other, even though that is not right because, as Opus points out, the Family limit is shared (i.e., they both can't claim the full amount per month).

I think the $4,438 is the result of the $3,550, for the last-month rule plus the extra three months at Family...i.e., 9 months at $291,83 and 3 months at $591.66.

So, this gives an excess contribution of $4011. The entire $4,011 needs to come out of the HSA, no matter who contributed it.

I will note that the spouse does not appear to have an HSA. If the spouse were to open her own HSA retroactive to 2020, then they could take some or all of the excess contributed to the husband's HSA and give it to the spouse's HSA.

This would achieve the best result for the couple.

[kyhmoya]

Thanks BillM223, your calculation is right. however, the wife has her own HSA and contributed $1350 separately. I checked at the turbotax that both husband and wife has separate HSA., but it calculated as above. 

[BillM223 · Accepted solution]

I believe the way this works is this:

Since in the calculation above, you took the Family coverage for those three months, your spouse cannot.

However, your spouse did have Self-only coverage on December 1st, so she qualified for the full annual amount for a Self-only policy, or $3,550.

If she contributed $1,350 to her HSA, then she can leave that in her HSA and still contribute the $2,200 of your excess to her HSA (be sure to tell the HSA administrator that the contribution is for 2020!). Remember that both of you can contribute to either HSA.

Because the two HSAs are totally separate (it would like you two having IRAs - they are both separate), the HSA administrator can't do this except by sending your excess back to you and then you sending part of your excess to your spouse's HSA.

Make sense?

[Opus 17]

Bill, one thing you said is incorrect. If the husband is covered by a family HDHP, and the wife has no other disqualifying coverage, then the wife is also deemed to be covered by a family HDHP. The wife is allowed to have an HSA and contribute to it, although the overall family limit still applies. In TurboTax, the taxpayer needs to indicate that the wife had family HDHP coverage for September, October, and November.

Once that is taken care of, it is clear that TurboTax is calculating the situation correctly. The taxpayer will have to return whatever overfunded amount as an excess contribution, but may then contribute to the wife’s account up to her annual limit, which will be something more than $3550 once the taxpayer checks that she was covered by an HDHP.  

Anyway you slice it, the $8450 that was actually contributed will be an excess of some kind, but a little bit less of an excess than currently calculated.

[BillM223]

@Opus 17

"then the wife is also deemed to be covered by a family HDHP." Yes, the spouse was covered by a Family plan for those three months (if the reporting on which months is accurate, as you point out); however, we are talking about the calculation of the annual HSA contribution limit for each HSA here.

The annual limit for the Family coverage is $7,000, to be shared between the spouses. In the calculation above, the entire $591.66 (one month Family coverage) is allocated to the husband, so you also can't allocate it to the spouse for the same months.

However, because of the last month rule, the spouse can claim $295.83 for each month, regardless of the shared Family coverage. Hence the spouse has $3,550 for the annual HSA contribution limit while the husband has $4,438, which is 9 months at the Self-only rate (thanks to the last month-rule for the husband - remember, on December 1st, he had changed to Self-only) plus three months at the Family rate.

I chose to allocate the entire Family coverage for those three months to the husband, because that minimized the amount of excess by the husband.

"The wife is allowed to have an HSA " - I missed the heading - "or my own HSA and my wife's HSA?", so she did have an HSA all along, so anything I said about her opening one is moot.

"the taxpayer needs to indicate that the wife had family HDHP coverage for September, October, and November." - I am sure the taxpayer did enter that, or else the excess calculations would not have turned out as they did.