HSA contribution / testing period / last month rule

[ambtlb13]

I was enrolled in a HDHP w/HSA in 2024 and January-November 2025.  I contributed the max amount in 2024.  I contributed 11/12th of the allowed amount in 2025.  When I entered data in Turbo Tax Online 2025, it tells me that I contributed too much and $429 will be treated as income and I'll incur the 10% tax penalty.

How do I figure out which year, 2024 or 2025, that I made an excess contribution?

[Mike9241 · Accepted solution]

Were you covered in every month of 2024 by an HDHP? If not, then you used the last month's rule (LMR) to make a full-year's contribution? The (LMR) requires you to have HDHP coverage through 12/31/2025. Since you were not, you must include in income the contribution made that wouldn’t have been made except for the last-month rule.

Say your HDHP coverage started in February 2024. The LMR rule would have let you make a prorata contribution for January 2024. Thus, since you failed to maintain HDHP coverage for 2025, the rules say that prorata contribution for January 2024 (the month w/o actual HDHP coverage must be recaptured). Assuming you were over 55 and made the maximum contribution of $5150 for 2024. 1/12 or $429 is recaptured.

If you were covered by an HDHP for all of 2024, you answered something wrong in either the 2024 or 2025 return since there would be no recapture.