family hsa plans

[azadbhatt]

I and my wife have the same employer. I made family hsa contributions until I got Medicare in 2021. Last year my wife had a HDHP and the employer made family hsa contributions for her in the same family hsa plan we originally had. Should she have started her own  hsa plan even though we are the same family?

Turbo Tax is asking for value of her plan-- but it is mixed with original family plan. Please help! thanks

[dmertz · Accepted solution]

HSAs are individual accounts, not joint accounts, even though the funds can be used to cover the qualified medical expenses of both of you.  Any contribution deposited into your HSA is your contribution, not your spouse's contribution.  A contribution is your spouse's contribution only if deposited into your spouse's HSA.

If the deposits to your HSA for 2021 exceed the amount that you are eligible to contribute for 2021, you've made an excess contribution that is subject to penalty each year it remains in the account.  Because it is now long after the due date of your 2021 tax return, the only way to eliminate the excess is to make a taxable distribution from the HSA which, if you are under age 65 at the time of the distribution, is also subject to a 20% additional tax.  The distribution is made taxable by not applying it to qualified medical expenses.  You can  also eliminate the penalty by spending the HSA down to zero.