What To Do If You Put Too Much Money Into HSA - Tips for Excess Contributions

Health Savings Accounts (HSAs) are a great way to save for healthcare expenses while enjoying tax benefits. However, there are limits to how much you can contribute to your HSA each year. What should you do if you realize you've put too much money into your HSA?

First off, don't panic! Here are some steps you can take to remedy the situation:

1. Understand the Contribution Limits: For 2021, the annual contribution limit for individuals is $3,600 and for families is $7,200. If you've exceeded these limits, you've made an excess contribution.
2. Correcting Excess Contributions: To avoid penalties, you should withdraw the excess amount from your HSA. Contact your HSA provider to initiate the withdrawal process.
3. Reinvesting Excess Amount: If you've earned any interest or investment returns on the excess contribution, you may need to withdraw those as well to avoid tax implications.
4. Avoiding Future Mistakes: Keep track of your HSA contributions throughout the year to ensure you don't exceed the annual limits. Utilize tools provided by your HSA provider to monitor your contributions.

Health Savings Accounts (HSAs) offer a superb way to save for your healthcare costs, and they come with great tax advantages. But sometimes, in the hustle and bustle of managing finances, you might accidentally exceed the allowed contribution limit. No need to worry! Here’s a helpful guide to rectify that situation.