My husband and I each had an HSA and an HDHP. I cover myself & 1 adult child <26. We checked both plans as family coverage. TT says we have excess contribution. How come?

[hsa-hsa]

My husband and I each had an HSA and an HDHP for all of 2018. I covered myself and one adult child under 26. He covered himself only. Following TurboTax’s advice, we already checked the box that each of us had family coverage. It still says we have $1100 excess contribution and it forces us to withdraw the excess or be penalized/taxed an extra 6%. How do we answer the TurboTax question when we each clearly contributed below the limits for 2018?  

Additional information:  Both my husband and I are over 55.  He contributed $4000 (2018 limit for Self was $4450 for someone over 55).

Our adult child lost her job in November 2017. Because she was still under 26, she joined my health insurance HDHP plan starting January 1, 2018 for the whole year.  As my daughter was on my HDHP family plan, I contributed $6000 to my HSA (family contribution limit for 2018 was $6900 + catch up $1000 = $7900).  As you see, my husband and I each contributed way below the limit.  Why does TT say we have $1100 excess contribution and how do we move forward? 

Thank you.

[BMcCalpin · Accepted solution]

You had half the answer when you reported that you were both under Family HDHP coverage. The other half of the answer is that you two share the Family HDHP contribution limit.

That is, you don't have one person contribute up to the Self limit while the other contributes up to the Family limit; instead, both must share the same limit. But because you both appear to be 55 or over, it gets a little more complicated.

This is what happened...

The normal annual HDHP contribution limit is $6,900. An HSA owner who is 55 or over gets a $1,000 increase in the limit for that HSA.

Thus, you could contribute up to $1,000 to your HSA and your spouse could contribute $1,000 to his HSA, and then you could split the $6,900 any way you liked between the two of you.

But note that this places an absolute maximum of $8,900 in total contributions, which you two exceeded by $1,100. And that would have worked only if you had two HSAs and put at least $1,000 in each one.

Hence the TurboTax message.

Your choices are to withdraw the $1,100 if you can (the IRS does not care which HSA you choose) or to carry the excess over to 2019 where it will be applied as a personal contribution (this means that you would have to reduce your HSA contributions in 2019 to allow for this extra contribution). Oh, and the carryover amount will be assessed a penalty on your 2018 return of the lesser of 6% of the carryover or the value of your HSA on December 31, 2018.

[Edited 3/20/2020 2:59 pm CDT - Note: for 2019, Self-only limit is $3,500 and Family limit is $7,000]

[hsa-hsa]

Thank you for answering my question so quickly! Your explanation was very clear and helpful!  We didn’t know that we both had to share the same limit. I will withdraw the excess since it seems that’s what you recommended as the first option.  Thank you again!

[PAB5150]

Am I reading your response right?  Even though there was a legitimate family plan by one spouse covering an adult child and a legitimate plan by the other spouse covering just themselves, they can only claim the family plan limit?  I am in the exact same situation and we are getting hit with a $3k overfunding message.

[Critter]

That is exactly the right answer ... you cannot go over the family limit by having 2 separate plans ... it is against the IRS rules.