UPDATE: Is this a bug in TurboTax? -- Need clarification of HSA contribution limit

[stanleyli]

Take tax year 2022 as an example:

"For 2022, the self-only HSA contribution limit is $3,650, and the family contribution limit is $7,300. "

I have an individual plan and my wife has a family plan covering herself + kids. Both plans are high deductible. We have two separate HSA accounts. 

What is the our contribution limit? My understanding is it's $3,650 for me and $7,300 - $3,650 = $3,650 for her. Within that limit, we can also do $x for me (where 0 <= x <= 3,650) and she can contribute $7,300 - $x.

However I can't contribute $4,000 (exceeding the individual plan limit).

Is my above understanding correct?

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Follow-up:

I have just noticed something weird in TurboTax. Even if I answered "I was covered by individual plan every month" and my wife as "I was covered by a family plan every month", Turbotax automatically checked "family" for Form 8889 box 1 (Check the box to indicate your coverage under a high-deductible health plan (HDHP) during 2022.) for both of us (see pictures below). I have already contributed $4,000 for 2022 but TurboTax calculate it as two family coverage and didn't say I need to take out the excess contribution. I do not know if this is a software bug or an exception in IRS rules.

Follow-up 2:

I did another experiment -- If I change my wife's coverage to "I was covered by self plan every month" too, then Turbox tax says I will need to take out the excessive contribution ($4,000 - $3,650), same as the people answered below.

So I am very confused why Turbotax acts in that way, seems it treats self + family coverage same as two family coverages.

[TaxLearner]

For 2022,the maximum contribution amounts are $3,650 for individual coverage and $7,300 for family coverage. So the max you and your wife can each contribute is $3,650 each and no more. 

[Opus 17]

Yes, although your formula needs to be re-worded.

Your limit is $3650, assuming you were eligible for all 12 months, or you are using the last month rule.

Her limit is $7300 - $x, where $x is what you actually contribute.

[stanleyli]

Thank you for your answer. Please see my follow-up question.

[stanleyli · Accepted solution]

Reading IRS's document again (Form 8889 instructions). I think the way Turbotax treats it is correct and my original understanding is actually not right.

"If both you and your spouse have HSAs, complete lines 1 through 13 as instructed on the form. However, if you, and your spouse if filing jointly, are both eligible individuals and either of you has an HDHP with family coverage, you both are treated as having only the family coverage plan. Disregard any plans with self-only coverage."

Can anyone confirm?

[BillM223]

Yes, the IRS says that if either spouse is under Family HDHP coverage, then both spouses are considered to share the $7,300 (for 2022) limit. This $7,300 limit can be shared in any way that is agreeable to the couple.

This rule is the source of endless confusion for taxpayers, who think that if one spouse has Family coverage while the other spouse has Self-only, that they have a joint limit of $7,300 plus $3,650.