What Happens If You Contribute More Than $3,400 to Your HSA?

Health Savings Accounts (HSAs) are a great way to save for medical expenses while enjoying tax benefits. However, there are rules governing how much you can contribute to your HSA each year. If you contribute more than $3,400 to your HSA, there can be consequences that you should be aware of.

Excess Contributions:

• If you contribute more than the annual limit set by the IRS, which is $3,400 for individuals in 2019, the excess amount will be subject to income tax.
• Any excess contributions above the limit are considered taxable income and will be included in your gross income for the year.
• You will also face a 6% excise tax on the excess amount contributed to your HSA.

What Can You Do:

• Withdraw the excess contribution before the tax filing deadline to avoid income tax and the excise tax.
• Contact your HSA provider to facilitate the withdrawal of the excess amount.
• If you do not withdraw the excess contribution in time, you will need to report it on your tax return and pay taxes on the amount.

It's important to be mindful of the annual contribution limits for HSAs to avoid any penalties or tax implications.

Understanding Health Savings Accounts (HSAs) is crucial, especially when it comes to contribution limits. If you find yourself contributing more than $3,400 in a given year, it's important to know the specifics regarding potential taxes and penalties that come into play.