Correcting Overfunding of HSA in 2024 on 2025 Taxes

[Robertsonland]

My daughter accidentally over funded her HSA by $900 in 2024. We took the penalty tax on the 900 and were going to under fund this year by $900.

The max this year was $4300 for her and she (and her employer) put in $3400. On the Form 8889 it shows the $3400 contribution and line 13 shows $900. Is this all she needs to do to correct this situation? And she can fully contribute now in 2026?

[MinhT1 · Accepted solution]

Yes, you can apply the 2024 excess contribution to the 2025 contribution.

You report the application on form 8889 on line 13, and on form 5329, you track the excess to 0 to avoid paying the excise tax for 2025.

For 2026, she can contribute up to the maximum allowed.

[Robertsonland]

So if her form 8889 has on line 13 $900 then that will be what we need to indicate that we are fixing this over payment from 2024? 

[BillM223]

The carryover of 900 from 2024 will initially appear in line 2 (8889). Thus, the carryover from a previous year is applied as a "personal" contribution in the current year. It will eventually appear on line 13, to be a deduction on Line 13 on Schedule 1 (1040).

In this way, the carryover from 2024 is used up in 2025.

You do not need to do anything to make this happen. TurboTax will automatically detect the carryover and put it in the correct place.

NOTE: if for some reason the 900 does not appear on line 2, then in the HSA interview, when you are asked if the HSA was overfunded in 2024, answer Yes and enter the 900 - but if you did the 1040 for 2024 on TurboTax, you should not have to make this entry, TurboTax should automatically carry the 900 over to the 2025 return.