What happens if you put too much money in a HSA?

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Why IRS HSA contribution limits matter

Health Savings Accounts (HSAs) are fantastic tools for managing healthcare costs and saving for future medical expenses. However, it's crucial to understand the rules and limitations that come with these accounts, including the contribution limits set by the IRS.

Health Savings Accounts (HSAs) are an excellent financial strategy to tackle healthcare costs while also preparing for future medical expenses, but understanding the IRS contribution limits is key.

Penalties for exceeding the annual limit

If you contribute more money to your HSA than the allowed annual limit, you could face penalties and tax consequences. The excess contributions are subject to a hefty 6% excise tax on the amount that exceeds the limit.

How to fix excess HSA contributions

But don't worry, there are ways to rectify this situation:

• You can withdraw the excess contribution before the tax filing deadline, including extensions, to avoid the excise tax. However, any earnings on the excess contribution will be subject to income tax and an additional 10% penalty if you're under 65.
• You can also leave the excess amount in the HSA and apply it towards next year's contribution limit. This can be a convenient way to utilize the extra funds without incurring penalties.
• Alternatively, if you accidentally exceed the limit due to multiple contributions, you can contact your HSA provider to request a corrective distribution to fix the error.

Tips to track contributions and seek help

It's important to keep track of your HSA contributions throughout the year to ensure you stay within the limits and avoid unnecessary taxes and penalties. If you have any doubts or questions about managing your HSA contributions, don't hesitate to seek guidance from a financial advisor or tax professional.