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Which year can they be claimed in?

Some background: In Feb 2019 I made a deposit of about $2,000 to my HSA so I would max out the $3,450 HSA limit for 2018 (and reduce tax liability). Unfortunately I havent been in a HDHP since July 2019 (but will be in Sept). So my maximum for 2018 should not have been $3,450 (or am I wrong in this?). The extra amount contributed will have to be declared as income in the 2019 return together with a 10% penalty. My 2019 income is significantly larger than my 2018 income

Would I be able to file an amended return for 2018, and not claim the $2,000 HSA contribution from Feb 2019 (and claim it instead in the 2019 return)

  • I don't see how your (lack of) enrollment in a HDHP plan between July and September affects a February contribution, whether you claim it for 2018 or 2019. – chepner Aug 21 at 20:10
  • How many months in 2018 were you covered by an HDHP? – Ben Miller Aug 21 at 20:33
  • @BenMiller 3 months (Sep, Oct, Dec) – mathemagician Aug 21 at 20:38
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    On your 2018 taxes, did you use the last month rule to max your contribution? Is the question you have about now not meeting the testing period for the last month rule? – Ben Miller Aug 21 at 20:47
  • @BenMiller Yes. I couldnt anticipate not being in a HDHP and maxing my contribution using last month rule seemed like the obvious thing to do. – mathemagician Aug 21 at 20:53
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When you are covered by an HDHP for only part of a year, your HSA contribution limit is prorated. If you are covered in December, you can use what is called the "Last Month Rule" to maximize your contribution, but the catch is that you must remain HSA-eligible (covered by an HDHP) for all of the following year. In your case, you used the last month rule in 2018, but failed to remain eligible all the way through 2019. The consequences are two-fold:

  1. Whatever you over-contributed past your prorated limit, you need to add back in to your income on your next tax return, so that you can pay tax on the money that you deducted in error.

  2. There is an additional 10% penalty on that amount.

These amounts will be calculated when you do your 2019 tax return on Form 8889, Part III.

Your question here is about re-categorizing your February 2019 contribution to be considered a 2019 contribution instead of a 2018 contribution. Unfortunately, you generally need to choose which tax year a contribution will belong to when you make the contribution, and you need to inform your HSA bank of your decision at that time. The bank reports to the IRS how much you contributed for each tax year. Since you've already specified to the bank that your February 2019 contribution was for 2018, and the bank has already reported this to the IRS (which they do in April), I don't think you can now choose to call that a 2019 contribution.

In IRS Publication 969, in the section about the Last Month Rule, there is a discussion about the consequences of failing to meet the testing period and some examples of how it works.

If you had caught this before you had done your 2018 return, you could have removed the excess contribution before April 15 and not claimed the Last Month Rule for 2018, but unfortunately you didn't know in time that you were going to fail the testing period.

  • Thank you for your answer. Technically, I never specified to the HSA trustee/bank that my Feb 2019 contribution was for 2018. I simply made the deposit online and then entered $2,000 in Line 2 of Form 8889. Does it make a difference? – mathemagician Aug 21 at 21:22
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    @mathemagician Possibly. If the bank considers that contribution as a 2019 contribution, then you could amend your 2018 tax return to not claim that contribution for 2018. However, you are still probably over the limit for 2018, and there will be a penalty/interest due with your amended return when your tax goes up for 2018. First things first: ask your bank which tax year they put that contribution in. If you didn't specify a year to them, my guess is that they are calling it a 2019 contribution. – Ben Miller Aug 21 at 21:30
  • I actually checked with the Bank and saw they had issued me a 5498-SA Tax Document in May 2019 and had calculated my contribution as a 2018 contribution. Guess there is nothing I can do now to salvage the situation. – mathemagician Aug 21 at 21:32

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