Leftover Funds From 2018 HSA

[BIGxRED]

I had both a high-deductible health plan (HDHP) and HSA for 2018. I made monthly contributions to my HSA in 2018. For 2019, I dropped the HSA in favor of a lower deductible health plan. I did not make any contributions to my HSA in 2019, but was told by my employer that I could continue to use my HSA for health expenses (which is what I did). I do not believe my HSA was rolled over.

Should I be taxed for the money that was left over in my HSA for 2019? TurboTax is telling me that I don't have to include any income because of the Last Month Rule. However, it's not clear to me as to why that applies in my case. I had an HDHP from 1/1/2018 - 12/31/2018. I did not have an HDHP from 1/1/2019-12/31/2019. 

Any clarification on this is appreciated.

[MinhT1 · Accepted solution]

If you did not have a HDHP in 2019, you cannot open or contribute to a HSA, but you can still use your existing HSA to pay for your out=of-pocket medical expenses. If all distributions from the HSA were for medical expenses, they are not taxable.