What Happens If You Go Over the HSA Contribution Limit?

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IRS HSA contribution limits and 2021 amounts

When it comes to contributing to your HSA (Health Savings Account), there are limits set by the IRS each year. In 2021, the contribution limits are $3,600 for individuals and $7,200 for families. But what happens if you go over these limits?

It's essential to stay on top of your HSA contributions, as exceeding the limits set by the IRS can lead to unwanted penalties. In 2021, the mentions were clear, with $3,600 for individual accounts and $7,200 for families. If you accidentally surpass these limits, you'll find yourself facing excess contributions that require immediate attention.

What happens if you exceed HSA limits

If you exceed the HSA contribution limit, the excess amount is considered an 'excess contribution.' It's important to be aware of the consequences of going over the limit:

• Penalties: You may be subject to a 6% excise tax on the excess contributions each year that the excess remains in your HSA.
• Corrective Action: You must withdraw the excess contributions plus any earnings on those contributions before the tax filing deadline.
• Tax Implications: The withdrawn excess contributions are not subject to the 20% additional tax if removed by the deadline.

How to avoid penalties from excess contributions

To avoid going over the HSA contribution limit, keep track of your contributions throughout the year and ensure you stay within the set limits to avoid penalties and unnecessary taxes.