Did you deduct HSA contributions in 2016 without being eligible for HSA contributions in 2017?

Health Savings Accounts (HSAs) are a great way to save for medical expenses while enjoying tax benefits. However, it's important to ensure you are eligible to make contributions to an HSA each year. If you deducted HSA contributions in 2016 but were not eligible for HSA contributions in 2017, there are implications you need to be aware of.

One key requirement for being eligible to contribute to an HSA is being covered by a High Deductible Health Plan (HDHP). If you no longer have an HDHP in 2017 but made contributions in the previous year, you may face penalties for excess contributions.

Excess contributions occur when you contribute more to your HSA than allowed by the IRS. If you find yourself in this situation, it's important to take corrective action to avoid additional taxes and penalties.

Here are some steps you can take if you deducted HSA contributions in 2016 without being eligible for HSA contributions in 2017:

• Calculate the excess contributions you made in 2017.
• Withdraw the excess contributions and any earnings before the tax filing deadline.
• Include the withdrawn amount in your gross income for the year.

It's always a good idea to stay informed about HSA eligibility rules and consult with a tax professional if you have questions or need assistance. Being proactive can help you avoid unnecessary tax liabilities and ensure compliance with IRS regulations.

Health Savings Accounts (HSAs) are not just a wise saving tool for medical expenses; they come with excellent tax advantages. Yet, to take full advantage, it's crucial to ensure you're eligible to contribute to your HSA each year. If you deducted contributions in 2016 but weren't eligible to make contributions in 2017, you might face some steep repercussions.