HSA contribution limit calculation

Forum|Forum|5 years ago
January 10, 2021
1 reply
0 views

I have an HSA, to which I was contributing for my wife and me. No employer contributions. We're both over 55. On August 1 I was eligible for Medicare, so our family limit is $4,750 (7/12 of $8,100 ($7,100 plus $1,000 of catchup)). Turbotax calculates that correctly. My wife is not on Medicare, so we started a separate HSA for her, in her name. Her contribution limit should be $2,654.17 (5/12 of ($3,550 + $1,000)), but it's calculated as $6,621. The questionnaire page asks if she was covered by an HDHP plan for the year, and the correct answer is different plan types (Family for the first 7 months and individual for the last five months). Changing the selected boxes for the type of plan doesn't affect the calculation. What needs to be entered differently to get the calculation corrected? Also, at the end of the HSA process, with the correct and not the TurboTax numbers, TurboTax calculates an Excess Contribution of $175. I have no idea where that calculation comes from.

Best answer by dmertz

Expert Reviewed

First, your own contributions are limited to 7/12 of $8,100 = $4,725, not $4,750.

The amount that TurboTax displays as the maximum contribution for each spouse is calculated without regard to the other spouse's contributions and represents the individual limit, not the combined limit. After factoring in the combined contribution limit TurboTax determines your wife's contribution limit to be the correct amount 5/12 of $3,550 (=$1,479.17) plus $1,000 = $2,479.17, not 2,654.17. The $175 error is somewhere in your own calculation of your wife's contribution limit. (I'm guessing that you calculated 5/12 of $3,970 instead of 5/12 of $3,550, then added the $1,000.)

dmertzAnswer

Level 15

Expert Reviewed

First, your own contributions are limited to 7/12 of $8,100 = $4,725, not $4,750.

JoeHeAuthor

Level 2

The short answer is, Thank you, that explains it!

The longer answer is some mistyping on my part. My HSA limit is $4,725--I just mistyped. I appreciate your trying to recreate my error with my wife's contribution limit. I think it should be 5/12 of ($3,550 +$1,000), or $1,896. (If you're interested, my error was copy and paste and calculating 7/12 of that $4,550. I believe that the $1,000 catch up has to be prorated through the year (although there is no net impact on us, as a couple). To your knowledge, is that correct?

I was wondering where the maximum contribution calculation on the page where I lay out that my wife was on a Family HDHP for 7 months and Self Only for 5 months came from. When I look at the correct numbers, that figure of $6,621 is the sum of my and her contribution limits. Some feedback for the Turbotax world is that locating that calculation on that page is confusing.

Thank you for your help

Joe

RaifH

Level 10

Thank you. So basically the entire amount contributed in 2021 is deductible and is already reflected in the Line 1 entry on W4. There should be no add back for excess as there is none. Is it necessary to go through the form 5329 and form 8889 data entry?

Yes, that is correct. You will not receive an additional deduction because the compensation on the W-2 already does not include the portion of the compensation that went to his HSA.

Form 8889 does still need to be completed to record the contributions. Form 5329 is only if there is a penalty. You are not being penalized for an over-contribution to an HSA, so as long as there are no other penalties on your tax return related to IRAs or ESAs, you do not have to complete it.

@Cindy77