If you find that you have contributed more to your HSA than your annual contribution limit, you can do an excess contribution withdrawal. This is effectively an “undo” button on your contribution: On your tax return you only report the amount you contributed without the excess. Any investment gains that were earned in the HSA using those excess funds must also be withdrawn, and they are added into your taxable income, so you can’t gain anything by contributing too much at the beginning of the year and withdrawing it at the end of the year.

Here’s my question: Let’s say someone made an HSA contribution and then later changed their mind in the same year. Can you do an excess contribution withdrawal even if you haven’t contributed past your limit? Would the IRS have a problem if it was reported to them that an excess contribution withdrawal was done, yet you didn’t report on your return that you had contributed up to your limit?

I have looked at IRS Pub 969 and I couldn’t find anything that explicitly prohibits this.

I don’t think the bank would have a problem with it, because they have no way of knowing what your contribution limit is. (It can be prorated based on your health coverage over the year.) But the IRS would know since you enter your prorated limit on Form 8889.

I am not in this situation, but if this is allowed it could help the OP of another question.

  • In case it makes a difference, the original problem wasn't that someone changed their mind about a contribution, but that their employer wrongly made an extra contribution.
    – TripeHound
    Commented Mar 9, 2018 at 12:42
  • 1
    @TripeHound Yes, he is asking about his situation. I am asking specifically if anyone can do an excess contribution withdrawal for any reason.
    – Ben Miller
    Commented Mar 9, 2018 at 13:41
  • I only mentioned it in case the answer for "because I changed my mind" is different to "because a mistake was made". It's plausible that you might not be able to reverse the former but may be able to the latter. (It's also possible that both cases or neither are allowed).
    – TripeHound
    Commented Mar 9, 2018 at 13:46

3 Answers 3


No, you cannot simply withdraw (non-excess) HSA contributions, you will owe a 20% fee (in addition to the due taxes); It doesn't matter if it is the same year.

Source: IRS (Notice 2004-50 Q&A 35)

Q-35. May an individual who has not made excess HSA contributions treat a distribution from an HSA other than for qualified medical expenses as the withdrawal of excess HSA contributions?

A-35. No. This withdrawal is deemed a withdrawal for non-qualified medical expenses and includable in the individual’s gross income under section 223(f)(2). (The additional tax under section 223(f)(4) also applies, unless otherwise excepted).

The only exceptions for the 20% fee are when you turn 65, become disabled, or die.

  • This is exactly what I was looking for. Thanks for finding this!
    – Ben Miller
    Commented Jul 14, 2018 at 14:11

HSA withdrawals are done on a direct charge basis (from a medical provider or similar), or on the basis of a self-reported reimbursement taken after the event. In this second case, the impetus remains on the individual to retain all documentation of expenses for several years after the fact. This is so that in the event of an audit, you can show a paper trail for each private withdrawal that you have made.

So what is the paper trail for withdrawals which are done as a refund of contributions? HSA by nature is a pre-tax account, with income tax not applying under normal use cases. By 'undoing' a contribution, you are in essence saying to the government "This income should have been taxed normally" and you need to report it appropriately for tax purposes.

This is done using form 8889 (standard form for HSA qualified and non-qualified distributions), and also by placing the income on line 21 of Form 1040, with the text "HSA" as the explanation. NOTE: In most cases there is an additional 20% tax on non-qualified distributions, see the instructions for form 8889 for more details.

  • 1
    I'm not sure this gets to the heart of the question. Can an HSA contribution for the year 2018 be optionally reversed by the account holder for the year 2018, without penalty but with some obvious income tax implication? The optionally part is the question. It's not clear whether you're answering with the boilerplate related to non-qualified distribution or if you're authoritatively stating that this specific situation same-year contribution reversal is tantamount to a non-qualified distribution.
    – quid
    Commented Jul 11, 2018 at 19:29
  • @quid I understand what you're saying, but I think the answer already covers it. The IRS doesn't differentiate on the reasons for the withdrawal, only on qualified (medical) vs non-qualified withdrawals (everything else). The conditions for the 20% penalty are fairly strict (see irs.gov/instructions/i8889#idm139679093483632) and trying to get around them will likely get you into trouble. The question specifically asked about making a withdrawal, although another obvious answer for the current year would be to reduce contributions until the desired total is met. Commented Jul 11, 2018 at 20:29

I'll preface this by saying I'm not necessarily a trust or IRS definition expert, but here goes. But I think this is a great question so it was fun to go looking through the regulations anyway.

To start I think this is the sentence in the IRS regs that really applies to this situation:

(E) The interest of an individual in the balance in his account is nonforfeitable.

This sentence is from US Code 26 Section 233(d) regarding Health Savings accounts. In broad strokes the IRS says contributions made to the trust created to house the HSA cannot be returned no matter who made the contribution. I tried looking for something that specifically said the contributions to the trust are irrevocable as the revocable/irrevocable differentiation of trusts is typically highlighted pretty obviously but couldn't find that specific word. I think the sentence above is essentially the irrevocable sentence.

The IRS HSA Trust Agreement October 2016 Revision (this is the most recent revision I could find) also includes the "nonforfeitable" language.

A Health Savings Account is defined as "a trust created or organized in the US as a health savings account exclusively for the putpose of paying qualified medical expenses of the account beneficiary"

The regulations then go on to define the five criteria that must be met in order for an HSA contribution to be valid:

  1. Except for rollovers no contribution can be accepted unless it is cash, and does not exceed the annual maximums stipulated by the IRS

  2. The trustee is a bank, an insurance company or other sufficiently approved administrator.

  3. Trust assets can not be invested in life insurance

  4. Trust assets will not be commingled with other property

  5. The interest of an individual in the balance in his account is nonforefeitable.

The regulations then go on to define qualified medical expenses, who the account beneficiary is, and so on and so forth. It seems the pertinent bit is that in order for a contribution to an HSA to be deemed valid it is permanent but for excess contributions because that breaks rule 1 above.

I looked for, but unfortunately couldn't find, a copy of the agreement I signed when I established my HSA to see if it used the word irrevocable. I'm pretty comfortable concluding "excess" contributions are a different than optionally rescinding or reversing a contribution.

  • Look downvoter, the HSA is not yours, a trust owns it for your benefit. The IRS rules say contributions are nonforefeitable, that means the trust cannot forefieit the money even if you want it to.
    – quid
    Commented Jul 16, 2018 at 17:21

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