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HSA planning with potential employment transition

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  • HSA planning with potential employment transition


    I have a high deductible health plan and max out my HSA annually. I am planning to contribute the $7,750 family maximum for 2023 by the end of February 2023. My question is: what happens if I do not have a HDHP for the entire 2023 year? I may be transitioning jobs to an employer who does not offer HDHP/HSA. My understanding is that I would receive tax deduction benefits for the number of months that I have an HDHP, so if I had HDHP for 6 months then I would benefit from $3,875 of tax deduction, and would owe FIT on the other $3,875. Similar calculations would be relevant depending on how many months I am covered by an HDHP in 2023.

    Is the above understanding correct? If so, it might make more sense for me to not contribute the family maximum and instead wait and see exactly how my potential employment transition plays out. I could then wait and contribute more to the HSA later in the calendar year if appropriate.


  • #2
    I'd just contribute monthly to avoid hassle of overcontributing. You have to withdraw the excess, notify the HSA, pay IRS penalty etc. Though I think you have until tax date to fix


    • #3
      You have until your tax filing deadline including extensions to remove excess HSA contributions with taxable earnings or pay a 6% excise tax just on the contributions.
      • If the excess HSA contributions are by salary reduction. You correct the reduction by including the excess contributions as "other income" on your tax return.
      • If the excess HSA contributions were made by direct contribution to an HSA account. You do not claim a deduction for the excess contributions.


      • #4
        Thanks so much for the information and advice!


        • #5
          To piggyback on this thread, I’m getting married next year and will have an HSA for 2/12 months (future job doesn’t offer HDHP). My current employer contributes $750 to my plan as a wellness incentive but 2/12*$3850=$641.67. Since the family HSA limitation is $7750, my understanding is we should collectively be eligible to contribute 14/24*$7750=$4520.83 so I would plan for my future spouse to just reduce her contribution a small amount next year ($4520.83-$750=$3770.83) to ensure we didn’t contribute above our contribution allowance. Am I essentially thinking about this correctly? Just confirming since there are two variables rather than just getting married or just changing jobs.