Tag Archives: 55+

HSA 55+ Catch Up Contribution When Spouses Have Separate HSA’s

You are probably aware that Health Savings Accounts have a contribution limit that changes slightly each year, and that your coverage (self-only or family) determines how much you can contribute to your HSA. For example, the contribution limits for 2017 are $3,400 for self-only coverage and $6,750 for family coverage. In addition, there is a catch up contribution for those that are 55 or older before the end of the year in the amount equal to $1,000. The IRS defines this catch up contribution in Form 969:

Additional contribution. If you are an eligible individual who is age 55 or older at the end of your tax year, your contribution limit is increased by $1,000. For example, if you have self-only coverage, you can contribute up to $4,400 (the contribution limit for self-only coverage ($3,400) plus the additional contribution of $1,000).

To qualify for the 55+ catch up contribution, you must be 55 within the tax year, be HSA eligible, and not be enrolled in Medicare – basically all of the stuff to be able to contribute to an HSA. The only addition is the age constraint thrown into the mix. This is generally easy enough for self-only coverage, but what do you do if your spouse is over 55 and you are not? Or, what do you do if both you and your spouse have separate Health Savings Accounts? You may be surprised to learn that the $1,000 can go on different lines on Form 8889 based on your coverage situation.

Catch Up Contribution follows the HSA Holder

A guiding principle is the $1,000 catch up contribution follows the HSA account holder, i.e. you or your spouse. To determine your household’s eligibility for a 55+ additional contribution, you must determine if the HSA account holder is age 55 or older by December 31st of the tax year. If they are, you can contribute to additional $1,000 to their HSA account.

The downside is your household may not qualify based on arbitrary factors of who opened the HSA and their age. For example, assume you are over 55 but your spouse is not. If your spouse owns the HSA, neither can contribute a 55+ catch up contribution for that year, until the spouse turns 55. Only then can one extra contribution be made, even though you are already 55 or older. Again, the 55+ contribution follows the account holder, so your age (as a non account holder) is irrelevant. The risk here is you may be shortchanging your household that $1,000 catch up contribution if the HSA account holder is younger.

[The way to get around this is, assuming you are on family coverage, to open an HSA in your name, so that you can contribute that $1,000 (assuming 55+) on top of the shared regular HSA family contribution limit. See next sections.]

Both Spouses have Separate HSA

Remember when we said earlier that the 55+ catch up contribution follows the HSA account? That also applies if you have family coverage and both spouses have their own HSA in their name. However, the rule still holds that only account holders 55 or older during the tax year can contribute the $1,000 catch up contribution to their HSA.

As another example, if you have family coverage with separate HSA’s and you are over 55 and your spouse is under 55, only your HSA can receive the $1,000 catch up contribution. Since this scenario requires the HSA’s to split the family contribution limit among them, for 2017 you will divide the $6,750 up however you like but your account must have the catch up contribution in it, if you make that extra contribution.

Thus, valid contributions for 2017 might look like this for the 55+ / < 55 accounts:

  • $6750 / $0
  • $0 / $6750
  • $3375 / $3375
  • $7,750 / $0 ($1,000 catch up used)
  • $1,000 / $6,750 ($1,000 catch up used)

In contrast, the following contribution combinations are invalid for 2017 for 55+ / < 55 accounts:

  • $0 / $7,750 (can’t put $1,000 in < 55 account)
  • $100 / $7,650 / $0 (must put all $1,000 in 55+ account)
  • $999 / $6,751 / $0 (must put all $1,000 in 55+ account)

Both Spouses 55+ and have Separate HSA

If both you and your spouse are over 55, have your own HSA’s, and are on family HSA coverage, you can both contribute the $1,000 catch up contribution to each of your HSA’s. For 2017, assuming full year coverage, this would be a household HSA contribution of $8,750 ($6,750 + $1,000 + $1,000). Again per Publication 969:

If both spouses are 55 or older and not enrolled in Medicare, each spouse’s contribution limit is increased by the additional contribution. If both spouses meet the age requirement, the total contributions under family coverage cannot be more than $8,750. Each spouse must make the additional contribution to his or her own HSA.

This is a secret HSA backdoor to increase your contribution limit above and beyond the stated family contribution limit, all by opening an HSA for each spouse. Many people don’t know that they can contribute so much money to an HSA as a family. Doing so should not bring additional cost, as it requires simply opening an HSA in your name. The cost being your time, a tax form, and perhaps an account minimum, but you gain an extra $1,000 / year in triple tax advantaged contributions.

————————————

Note: if you have an HSA, please consider using my service EasyForm8889.com to complete Form 8889 come tax time. It is fast and painless, no matter how complicated your HSA 55+ contribution situation.


EasyForm8889.com - complete HSA Form 8889 in 10 minutes!

2017 Max HSA Contribution Limits and HDHP Definitions

The IRS has performed their magical inflation calculations for 2017 and updated definitions for High Deductible Health Plan as well as the maximum contribution limit is for Health Savings Accounts (HSA’s). These changes affect who is qualified to open / contribute to an HSA and how much they can contribute.

2017 HDHP Limits

One prerequisite for opening or contributing to a Health Savings Account is that you are covered by HSA eligible insurance, otherwise known as a High Deductible Health Plan (HDHP). The IRS sets limits as to what constitutes an HDHP to define who is HSA eligible or not. Per IRS Rev. Proc 2016-28, for 2017, the IRS has defined a High Deductible Health Plan as:

…a health plan with an annual deductible that is not less than $1,300 for self only coverage or $2,600 for family coverage, and the out of pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,550 for self-only coverage or $13,100 for family coverage.

So you need to have an annual deductible greater than $1,300 / $2,600 (self-only / family) to qualify for an HDHP, and thus, an HSA. In addition, your total out of pocket (OOP) expenses cannot exceed $6,550 / $13,100 (self-only, family) for the entire year. As you can see, the folks at the IRS have been hard at work as this represents no change in HDHP limits from 2016 to 2017. The following table compare HDHP limits for the past few years:

2014 2015 2016 2017
Self-Only Min Deductible $1,250 $1,300 $1,300 $1,300
Self-Only OOP Max $6,350 $6,450 $6,550 $6,550
Family Min Deductible $2,500 $2,600 $2,600 $2,600
Family OOP max $12,700 $12,900 $13,100 $13,100

2017 HSA Contribution Limits

The IRS also defines the maximum amounts that may be contributed to a Health Savings Account each year. That amount is updated based on inflation calculations and whatever else the IRS feels like for a given time period. Per IRS Rev. Proc 2016-28, the 2017 HSA contribution limits are:

…the annual limitation on deductions for an individual with self-only coverage under a high deductible health plan is $3,400… the annual limitation on deductions for an individual with family coverage under a high deductible health plan is $6,750.

So the cap or maximum contribution amount to your HSA is $3,400 for self-only coverage and $6,750 for family coverage. Note that this does not include the additional 55+ catch up contribution of $1,000 allowed to properly aged HSA holders. Thus, if you are over 55 on or before the end of 2017, you can contribute $4,400 for self-only coverage or $7,750 for family coverage.

As evidenced by the following chart, the IRS has made the slightest change in increasing the 2017 HSA contribution limit by $50 over 2016. You can see the history of HSA contribution limit increases for 2014, 2015, 2016, and now 2017 in the chart below:

2014 2015 2016 2017
Self-Only HSA Contribution Limit $3,300 $3,350 $3,350 $3,400
Family HSA Contribution Limit $6,550 $6,650 $6,750 $6,750
55+ Additional Contribution Limit +$1,000 +$1,000 +$1,000 +$1,000

————————————

Note: if you have an HSA, please consider using my service TrackHSA.com to manage your Health Savings Account receipts. You can store purchases, receipts, and reimbursements securely online, tracking the lifecycle of your purchases and audit proofing yourself from the IRS.

TrackHSA logo

HSA Catch Up Contribution Limits for Age 55+

This question was submitted by HSA reader Theresa. Send yours in to evan@hsaedge.com

Help, just watched your video on form 8889. Line 3 baffles me. What is entered on line 3 if you are NOT under age 55?? My husband is over 55 and I am under 55. He is the policy holder of the HSA. So does that mean I leave line 3 blank? So confused!

Thanks for your email. This certainly is confusing as upon review, I had not observed the nuance in making 55+ contributions when filing Form 8889 for HSA’s. You will see that filing Form 8889 for 55+ contributions depends on your age / plan coverage / marital status, so I’ll go through it in detail.

Background

To account for higher medical costs, and as an incentive for older HSA participants to increase their total savings, the IRS allows an additional $1,000 to be deducted from your taxes if you are over age 55. There are a few important things to consider regarding eligibility for this “catch up” contribution:

  1. Must be 55 at the end of the tax year (12/31)
  2. Cannot be on Medicare (see below)
  3. Must be an eligible individual with HDHP insurance

This is backed up by the IRS tax rules for HSA’s, regarding additional 55+ contribution:

Additional contribution. If you are an eligible individual who is age 55 or older at the end of your tax year, your contribution limit is increased by $1,000. For example, if you have self-only coverage, you can contribute up to $4,350 (the contribution limit for self-only coverage ($3,350) plus the additional contribution of $1,000).

HSA Contribution Limits for over 55

Thus, if you turn 55 during a year, you can contribute the entire $1000 to your HSA that year. Of course, if you are older than 55, you can also contribute that $1000 each year. In technical terms, this means that your HSA contribution limit is increased by that $1,000, so for 2016 this gives us a total of:

  • Single coverage – $4,350 = ($3350 + $1000)
  • Family coverage – $7,750 = ($6750 + $1000)

How 55+ Contributions are filed on Form 8889

There is actually a bit of nuance as to where the additional $1000 appears on HSA form 8889 when you file your taxes. Where this amount is taken into account strangely enough depends on your coverage type and if you are married. You can view this by viewing the Form 8889 Instructions and seeing how the flow chart works for Line 3. You will notice that if you are married on family coverage, you get diverted to Line 7. Here is how things break down:

  • If 55+, single coverage, and unmarried – the $1,000 gets added to your single contribution limit on Line 3
  • If 55+, family coverage, and unmarried – the $1,000 gets added to your family contribution limit on Line 3
  • If 55+, family coverage, and married – the $1,000 goes on Line 7. For Line 3, enter your contribution amount without the $1,000

So to answer the original question, it sounds like your husband is 55+ and you are < 55, and that he is the primary holder of family coverage on the HSA. As such, you fall into the 3rd example above, so make sure that Form 8889 Line 3 is your family contribution limit (2015: $6,650) and Line 7 reflects your catch up contribution (2015: $1,000)

65+ with HSA and enrolled in Medicare

However, Uncle Sam is not as kind to seniors who are using their HSA and enrolled in Medicare. In fact, they do not allow contribution to HSA’s while enrolled in Medicare. This is applied on a pro rata basis, so if you are on Medicare for part of the year your contribution limit is reduced by that “partial” amount (percentage) for the year. Back to the IRS rules:

Enrolled in Medicare. Beginning with the first month you are enrolled in Medicare, your contribution limit is zero.
For example: You turned age 65 in July 2015 and enrolled in Medicare. You had an HDHP with self-only coverage and are eligible for an additional contribution of $1,000. Your contribution limit is $2,175 ($4,350 × 6 ÷ 12)

————————————

Note: if you have an HSA, please consider using my free service TrackHSA.com to manage your Health Savings Account. You can store purchases, receipts, and reimbursements securely online for free.

TrackHSA logo