Count HSA Excess Contribution Towards Next Year
I got married in the middle of the year and we switched to my health insurance family plan. I didn't take into account my wife's previous HSA contributions so I over-contributed to our family HSA by $497. I'd like to make this count towards the following year. I understand that there will be a 6% excess tax for leaving the balance there.
What's are the right menu options in FreeTaxUSA to select to make this happen? When it asks if I will withdraw the excess contributions, do I just say 'No' and that's enough? I worry that it is also taxing the excess as income.
Answers
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Hi Soquidus,
Congrats on getting married!
Excess contributions to an HSA are any amount contributed over the annual limit of $8,300 (Family) or $4,150 (Single). If you have both a family and single HSA (between 2 spouses) you still cannot go over the total family limit. The only exception is the $1,000 additional contribution for those over 55.
The additional tax is 6% of the smaller of your excess contributions or the value of your HSA(s) on December 31, 2024 (including 2024 contributions made in 2025). And yes, the excess contribution is subject to income tax at your regular rate if not withdrawn.
In FreeTaxUSA software follow this menu path: Deductions/Credits > Health Savings Account (HSA). Follow the prompts until you come to the screen "Will you withdraw your excess HSA contributions?" Here is where you will answer YES or NO.
Since you'd like to leave the excess to count for next year (i.e. this year in 2025), answer NO. You'll pay the additional tax, but then apply the overcontribution to the following year (2025). Just be sure to count it in the following year contributions so you don't go over again.
Taking your example of $497 as an excess contribution not withdrawn, rounding that up to $500 not withdrawn by the filing deadline, you'll pay $30 additional tax on the return (500 x 6% excess penalty = $30). Then you'll subtract that from the family limit for 2025.
That leaves $8,300 - $500 to contribute for 2025.
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Perfect, thanks Kristine!
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Hi, I have a similar question. I made an excess contribution of $400 in 2024, decided to leave the excess there, and decreased the contribution amount by $400 in 2025. Does this mean that when I filed my 2025 tax return, it should look something like this…?
Was [Name] taxed for excess HSA contributions in 2025? → YesEnter the amount of total excess contributions from Line 48 of [Name]'s 2024 Form 5329? → $400
I think I won't receive my Form 5328 until May, which is after the tax filing deadline. And since I choose not to withdraw the $400 and pay the 6% excise tax in 2025, that's how I should report it next year?0 -
Hi Twinklelalala,
When you have an excess HSA contribution. You have two options:
- Pay the excess penalty in the current year and leave it in the HSA as a contribution to next year.
- Withdraw the excess by April 15 and avoid the penalty
You are choosing option #1, so Yes, that is how you report it in 2025. Just make sure you count that $400 as part of your 2025 HSA contribution.
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