HSA Excess Contribution Reporting – Withdrawal & Interest

tb001
tb001 Member Posts: 5 Newcomer
in Filing my taxes

Hi

We discovered an excess HSA contribution while filing our 2024 taxes and would appreciate guidance on reporting it correctly in FreeTaxUSA.

Here’s our situation:

  • We have a family HSA contribution limit of $8,300.
  • I contributed $2,175 to my HSA earlier in the year.
  • Later, I moved to my wife’s health plan and she contributed $6,500 to her HSA through her employer.
  • That totals $8,675, so we exceeded the limit by $375.

After realizing this during tax prep, we contacted my wife’s HSA provider and requested to withdraw $400 (to cover the $375 excess and any interest earned, which they said is usually just a few cents). The funds will be deposited into our bank account in few days.

I assumed we don’t need to wait for paperwork and can proceed with filing taxes since the withdrawal has been requested.

Now in FreeTaxUSA, I’ve reached the screen: “Will you withdraw wife’s excess HSA contributions?”

Here’s what I did:

  1. For the question “Enter the amount of 2024 excess contributions of $375 that will be withdrawn and meet the conditions above”, I entered $375 (the field doesn’t allow more than that).
  2. For “Enter the value of all wife’s health savings accounts as of December 31, 2024, including 2024 contributions made during 2025”, I entered $6,500 (her total contribution per her W-2).

My questions:

  1. Did I enter the correct information in both fields?
  2. Do I need to report the $25 extra we withdrew to cover interest? If so, where and how should I do that?
  3. How do I calculate the actual interest earned on the excess amount (if required)? Is there a step-by-step guide or calculator within FreeTaxUSA for this?
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Answers

  • MatthewD
    MatthewD FreeTaxUSA Team Posts: 588
    edited April 24

    Hello tb001,

    Thank you for the detailed description of your HSA situation. Much appreciated. Let me address your questions:

    1. Yes, those entries are correct.
    2. No, the extra $25 you withdrew does not need to be enter for 2024. However, on your 2025 return, you will get a 1099-SA for HSA distributions. Report that as an amount NOT used for medical. It will be taxed on your 2025 return.
    3. The interest that you withdrew will be reported on the 2025 return as I mentioned above. There is no way to calculate the actual interest earned and that it is not required.

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