2021 HSA contribution limit

[taxedquestions]

TurboTax 2021 has the wrong HSA contribution limit.  The 2021 limit should be $7,200.  I am over 55, and so am entitled to another $1,000. 

My limit should be $8,200, but TT is showing $8,100 as my limit and is telling me I have over contributed by $100.  Please fix the limit in the software.

Thanks.

[rjs · Accepted solution]

The early releases of any tax software for the new year are really just a rough draft. A lot of things aren't included yet, and a lot of things haven't been updated yet from the previous year. Things like inflation adjustments will be taken care of in updates over the next couple of months. The IRS has not even announced a date when filing 2021 tax returns will start, but it won't be until sometime in late January.

[taxedquestions]

Thanks.  I bought the software early to get a handle on what I might owe.

If the software is not up to date, can you tell me whether there will be a section for reporting stimulus checks received from the government?  What form would they be reported on?  A 1099-G?

Thanks.

[rjs]

There will be a section in TurboTax for the stimulus payment. That's one of the many things that will be added in an update.

The only stimulus payment that affects your 2021 tax return is the third stimulus payment. It is not reported on a 1099-series tax form. If you received the payment, you should have also received a letter, Notice 1444-C, telling you how much you received and how it was paid. If you didn't get the letter, or misplaced it, you can get the information at the following link on the IRS web site.

Get My Payment

Go to the following link on the IRS web set for more information about the third stimulus payment.

Third Economic Impact Payment

[taxedquestions]

Thanks.

[rjs]

I  just learned that the IRS is going to send another letter in January, Letter 6475, showing the amount you received for the third stimulus payment.

[JDS250]

The same issue exists for Single HSA limits. I put in $3600 for Single and it's telling me I overpaid by $500.

[RobertB4444]

@JDS250 any chance you have HSA contributions included on your W2 form as well as the $3600 you entered?  That would change the amount you entered.  Any HSA contributions would be shown on your W2 in box 12 with code W.

[JDS250]

Sorry - wasn't clear. The $3600 for the HSA was from W-2 Box W. No other entry for HSA was entered. So the total contribution for HSA was $3600 which was from W-2. 

[RaifH]

If the $3,600 was the only contribution to your HSA and you had self-only coverage and a high deductible health plan (HDHP) the entire year, you should not be getting penalized for excess contributions. To verify that all your information is in the system correctly, please follow these steps:

1. In the Federal section of your tax return, go to Deductions & Credits and scroll down to Medical and click Revisit/Start next to HSA, MSA Contributions.
2. If you made any withdrawals from your HSA, you should receive a 1099-SA and answer Yes to Did you use your HSA to pay for anything in 2021? Otherwise select No.
3. Assuming you did not inherit this HSA, select No.
4. Under Let's enter your HSA contributions your employer amount should already be in there from the W-2. Unless you made additional contributions, leave Any contributions you personally made blank. 
5. Answer the questions on the next two screens, then make sure you answer the question related to your HDHP correctly on the next screen. If you had self-only coverage the entire year, you should not be penalized for excess contributions.
6. Unless you overfunded your HSA in 2020 🙂 This answer is probably No.

Once that information is entered, you should no longer see the $500 overpayment.

@JDS250

[JDS250]

I have tried the steps you describe multiple times and continue to get the same message saying I contributed excess amount to HSA - i contributed $6100. Note, I had Family HSA covering my daughter and I which i entered with no problem. My wife has a Single HSA (we work for same company so we can't cover each other) and her HSA is the one we get the excess contribution of $500.

Is it looki g at combined amout?

[BillM223]

It is not obvious, but if one spouse has Family coverage, then the IRS considers for purposes of calculating the annual HSA contribution limit that both spouses share the same Family coverage (despite the fact that your spouse had a Self-only policy).

That is, you and your spouse share the $7,200 Family between you - you could put all 7,200 into your HSA or all 7,200 into her HSA or split the 7,200 any way you like.

What you cannot do is add the $7,200 Family limit to the $3,600 Self-only limit and have a $10,800 limit for the two of you. Your contributions are considered in the aggregate.

If I understood your situation correctly, then I am thinking that your spouse contributed $1,600 to her HSA. Your limit is $7,200 (unless one or both of you are 55 or older), and when you subtract your $6,100 and her putative $1,600, this results in a deficit (the excess) of $500.

Does that makes sense?

@JDS250

[JDS250]

I understand your detailed explanation - thank you. Let me see if i can make sense of my numbers. So i contributed $6100 in a Family HSA to cover myself and daughter (25 yr old). My wife contributed $3600 to Single HSA to cover herself since we work for the same company we can't cover each other. So we contributed a total of $9700. We are both over 55 so if we both had Single HSA's would the total allowed be $3600x2 = $7200 plus $1000 extra for each of us being over 55, for a total of $9200 allowed? That would seem to make sense when TT is saying we overcontributed by $500.  Does that sound right?

I still think we did not overcontribute based on HSA rules, but at least i understand how TT is calculating it. By the way, i filed the same way for 2020 and never came across this issue!

[BillM223 · Accepted solution]

"We are both over 55 so if we both had Single HSA's would the total allowed be $3600x2 = $7200 plus $1000 extra for each of us being over 55, for a total of $9200 allowed? "

Close but not exactly. There is one more trick - while the two spouses are allowed to share the $7,200 any way they like, the $1,000 bonus to the limit belongs only to the owner of the HSA who is 55 and 55+. That is, if you are trying to max out your contributions ($9,200), you can't put more than $8,200 into one HSA, because the bonus $1,000 for the other spouse has to go into the other spouse's HSA.  Fortunately, this is not an issue for you because you put more than $1,000 into each HSA.

So it breaks down this way: 

$1,000 to your HSA (bonus amount)

$5,100 to your HSA

$1,000 to your spouse's HSA (bonus amount)

$2,600 to your spouse's HSA

The $5,100 and the $2,600 reflect how you shared the Family limit of $7,200; and, as you can see, your amounts are $500 more than the Family limit.

As for how the IRS calculates it, as I have noted, this sharing of the Family annual HSA contribution limit is not obvious, but please read "Rules for married people" in IRS Pub 969. Look especially at the "Example" which follows as it is almost exactly your situation (but only one spouse if 55+ in the example).

Really, TurboTax calculates it the way the IRS wants it. I don't know what you did in 2020, but this is the way TurboTax has done it for years.

@JDS250

[taxedquestions]

Thanks for that great explanation.  I did not realize my wife and I would both qualify for the extra $1,000 if we have separate accounts and are both over 55.

Is it too late to contribute for 2021?  Or can we contribute up to April 15th?