HSA Contribution Limits After Death of Spouse

[lyndakay27]

My spouse died last April, and I inherited his HSA. When working on my HSA tax section, Turbotax is saying that my husband has an excess contribution that needs to be removed. However, the total amount contributed by my spouse and me is below what Turbotax says I can contribute for the year. When an HSA is inherited, are the contribution limits still figured separately for each spouse? I am using the desktop Mac version. 

[BillM223]

My I assume that you two had Family HDHP coverage? If so, the Family contribution limit is shared by the two of you, and the contributions are calculated the same way. Offhand, I don't see why TurboTax would find an excess.

To help us out, please list the type of HDHP coverage (was it Family?), the months of coverage, the amount of HSA contributions, did you both have HSAs, or did only your spouse, the amount of your contributions, the amount of the excess, were either of you 55+, etc. 

[lyndakay27]

We had family HSA coverage until his death in April. The HSA then was inherited by me moving me to single HSA coverage. I did not have any other HSA prior to my inheriting my husband's. He contributed $3960 through April. I contributed $2500 after his death. Turbotax says there is a $777 excess for my husband's contributions.  We are both over 55. I found one bit of guidance online that says we each would have our own limits, which would make the excess correct, but I couldn't find anything stating that through the IRS information. I'm going to bring this to my tax accountant, but was hoping someone here might have info as well. 

[Vanessa A · Accepted solution]

Yes, this would be correct.  The reason TurboTax is saying you have an excess is because his contributions are prorated based on the months he was alive.  So since he passed away in April, and was over 55, his prorated amount would be $3,183.33.  To calculate this you would take the Family Contribution limit of $8,550+ the $1,000 catch up for a total of $9,550.  Since he was only eligible for 4 out of 12 months, you would multiple that $9,550 by 4/12 for a total of $3,183.33.  That would be HIS contribution limit for 2025.  Since he contributed $3,960 he has an excess contribution of $777 (3,960-3,183)

Form 8889 instructions says "If you were not an eligible individual on the first day of the last month of your tax year, use the Line 3 Limitation Chart and Worksheet (in these instructions) to determine the amount to enter on line 3. (See (6) in this list.)"

Since he was not eligible on the last day of the tax year, the limitations are being applied. 

After he passed away, the HSA was treated as yours.  So your contributions would have been ok for the full amount as long as you were still eligible on the first day of the last month of the tax year.