HSA Last month rule due to spouse FSA

[rohit1183]

I am confused as to how to fill out the taxes for the situation below:

2024 - I was covered under my spouse's HDHP plan for the entire year. I did not have FSA. I had my own HSA but did not contribute. Spouse contributed to her HSA up to the allowed maximum.

2025- I opted for FSA (by mistake). I was covered under my spouse's HDHP plan. I contributed to FSA, and my spouse contributed to her HSA. Upon realizing the mistake, the FSA was closed before 1st Dec 2025. Spouse contributed up to the max amount through 2025 to her HSA.

As per what I know, since the FSA was closed before December 2025, it makes the spouse's contribution to her HSA legit as per the last month rule.

However, when I answer the questions on TurboTax 2025 Desktop, the last month's rule-related information is not populated on Form 8889. 
TT asks about HDHP eligibility and if we were covered by a family plan for 2024/2025. How to indicate that I had FSA from Jan-Nov in 2025 so that it correctly depicts the tax situation?

[BillM223]

Yes, the important thing is what type of coverage you had on the first day of the month.

When your spouse (in fact, both of you) do the HSA interview, when your spouse is asked "What type of HDHP coverage did (spouse) have in 2025?", you answer, "different types at different times of the year".

The next screen will show each month. You will enter None for Jan-Nov, and then Family for December. This will enable TurboTax to use the last-month rule, and make the contribution work. 

NOTE: if you do this (which is logical), you must keep HDHP coverage all through 2026. If you don't, there will be a process to recalculate your HSA contributions for 2026...could be big, but not fatal. I don't want you to think that you shouldn't do the last-month rule (which is what your question is referring to), but to just be prepared if you somehow lose the HDHP coverage in 2026.

[rohit1183]

But TurboTax asks about the HDHP plan and not whether we had HSA/FSA. Technically, we both were covered in an HDHP family plan throughout the year. It's just that I had an FSA account from Jan-Nov, so that disqualifies having an HSA account. But irrespective of HSA/FSA, we were still covered by an HDHP plan for the whole year. Maybe I am getting confused.

[BillM223 · Accepted solution]

It is easy to be confused, but this is because of the way the IRS refers to things.

What you can't do with an FSA is CONTRIBUTE to your HSA - the HSA will still be there when you return to HDHP coverage (if you ever do). 

Yes, you had Family HDHP coverage all year (2025), but we are not trying to figure out your insurance coverage, we are only trying to calculate your annual HSA contribution limit. FOR PURPOSES OF CALCULATING THIS LIMIT, you have to say that you had NONE for HDHP coverage for any month (Jan-Nov in your case) that either one of you had FSA coverage.

So don't let it confuse you...in this section, you are telling TurboTax month by month if you had HDHP coverage with no conflicting coverage (like an FSA or Medicare or whatever)...NONE means that either you had no HDHP coverage OR you had HDHP coverage but also had conflicting coverage.

P.S. To put it more accurately, once you have an HSA, you will always have it so long as there is money in it (in this way, it is like an IRA). You don't lose the HSA even when you lose your HDHP coverage or have conflicting coverage.

[lchung]

Similar situation here. Wanted to get clarification. 

If there were contributions to an HSA DURING a period of ineligibility due to secondary non-HDHP coverage, does the last-month rule override the need to withdraw excess contributions made during this ineligible window?

For example: Individual has family HDHP and contributed in Jan-April, while being covered on a secondary HMO (non-HDHP plan) through spouse. The spouse changes jobs and signs up for an individual HSA through the rest of the year from July-December. Both individuals are covered on a HDHP on Dec. 1, 2025. Does the first individual have to contact the HSA custodian to withdraw the contributions from Jan-April 2025? If the last-month rule overrides the ineligible contributions then is the max limit for the family still $8550 for 2025? This will assume that HDHP is maintained throughout all of 2026. Thanks!

[dmertz]

"does the last-month rule override the need to withdraw excess contributions made during this ineligible window?"

Yes.  Because you qualify under the last-month rule, the amounts contributed earlier in the year are not excess contributions.  The timing of the contributions is irrelevant.  All that matters is that the total contributed for the year does not exceed the maximum permissible for the year.

[lchung]

Excellent, this is super helpful! Thank you!