Best way to handle $250 HSA excess contribution?

Junco
Junco Member Posts: 1 Newcomer
in Credits/Deductions

I contributed $250 over the family limit for 2025. Should I have my HSA custodian process an excess contribution refund or should I have them process an individual contribution tax year correction?

I was thinking the individual contribution tax year correction would be simpler. My last contribution in 2025 was for $329 on 12/17/2025, so I was going to have my HSA custodian recategorize my $329 contribution from 2025 to 2026.

When filing, I can select Yes for "Will you withdraw your excess HSA contributions?" Then for 2026, I'll factor in $329 when calculating my workplace contribution total for the year (ie. $8,750 - $329 = $8,421).

Does this work?

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Answers

  • TaxMorgan
    TaxMorgan FreeTaxUSA Agent Posts: 79 image
    Hello Junco,

    Ultimately, it is up to you whether you want to remove the excess contribution from the account or recategorize it to be a contribution for 2026 instead of 2025.

    Please note that the amount of the excess contribution will be entered as taxable income on your return, but there will not be a penalty issued since the excess is reported as being withdrawn.
  • grace_a
    grace_a Member Posts: 1 Newcomer

    I had a similar situation, but I saw that I was going to go over the max contribution last year and submitted the excess contribution form with my HSA provider and received the excess contribution check in August 2025. Now I have two 1099-SA forms from my HSA provider. How should I report this?

    Do I enter the combined amount from the two 1099-SA forms or do I enter the original 1099-SA with the distribution code 1 and then the excess contributions not through my employer based on the difference from my W-2 and the 5489-SA from my HSA provider?

  • TaxMorgan
    TaxMorgan FreeTaxUSA Agent Posts: 79 image
    Hello grace_a,

    Yes, you will enter the combined amount from the two 1099-SA forms as distributions.

    After entering the amount, you will answer no to the question asking if all of the distribution was used for medical expenses.

    On the next screen, you will be able to indicate the amount of the distributions from excess contributions, and they will be added to your tax return as taxable income.

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