Question

Excess HSA contrubution carryover

Forum|Forum|1 year ago
March 30, 2025
2 replies
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I have a $35 excess hsa contribution in 2023 on which I paid the 6% tax on the tax returns that I filed. Now I'm completing 2024 and I'm paying taxes again on that $35 excess contribution. In 2024, I underfunded the HSA by over $500. I read somewhere that under funding in a future year could be used to offset excess contributions in previous years. Does TurboTax do this on its own so when I file my taxes for 2025, that $35 excess contribution and the associated taxes, etc. will be gone or do I need to do something for my 2024 taxes to reflect I'm using that $35 towards the remaining hsa contribution I would have? I cannot withdraw the excess from 2023, because to my understanding I only have until April 2024 to have done that.

O

Opus 17

It should be handled by the program, although I have not tested how this particular function works. Did you run the entire interview or have you been skipping around?

What are your contributions for 2024?

If you contributed via payroll deduction, your current contributions are picked up automatically from your W-2. When you run the full HSA interview on the deductions and credits page, you should be asked about prior year excess (to confirm the amount carried over, or to report the amount if you did not use Turbotax), whether you made any additional out of pocket contributions, and how many months you were enrolled in an eligible plan.

If the excess is still being taxed after that, you may need to call customer support so they can look at the file.

S

skpatel1007Author

So it did tax me for this year as an adjustment by adding it to my income. However, I was under the max contribution this year so I'm not sure if TurboTax will make this go away next year. I did call in and the person told me most likely it will go away but was not 100% sure. It was only $35 excess so he pretty much told me to see what happens next year and if it doesn't go away then I would need to sign up for live support which is additional fees for someone to look at the tax file.

O

Opus 17

@skpatel1007 wrote:

So it did tax me for this year as an adjustment by adding it to my income. However, I was under the max contribution this year so I'm not sure if TurboTax will make this go away next year. I did call in and the person told me most likely it will go away but was not 100% sure. It was only $35 excess so he pretty much told me to see what happens next year and if it doesn't go away then I would need to sign up for live support which is additional fees for someone to look at the tax file.

This reply is confusing because in your original post you said 2023 and 2024, but now you are saying "this year" and "next year."

If you made an excess contribution in 2023, and did not remove it by the required deadline, it was added back to your taxable income plus a 6% penalty. That $35 excess is still in your account. If you are eligible for an HSA for all of 2024 and you contributed less than the 2024 limit, the 2023 excess should be applied to the 2024 limit, which means it is no longer considered excess and not subject to tax.

The same thing would be true if you made an excess contribution in 2024 and do not remove it. It will be added to your taxable income and subject to penalty, but as long as you remain eligible in 2025, and contribute less than the 2025 maximum, the 2024 excess will be applied to the 2025 limit, and won't be considered excess any more.

But you said this already happened for 2023 and you are still being penalized in 2024. To understand that would require looking at your form 5329 and your form 8889. If you are using Turbotax installed on your own computer, you can switch to forms mode and look at the forms. If you are filing online, you need to call customer support so they can look at your return with you. No one on this forum can see your return.

K

KeshaH

You'll need to do this process through your plan administrator. It doesn't happen automatically on your tax return. You'd contact your plan administrator and let them know you want your excess contribution from 2023 to be treated as a 2024 contribution. Otherwise, you'd need to withdraw it to avoid the penalty.