HSA Catchup Contribution Question

[MercyMe]

I have an HSA at Fidelity that is under my name but the funds from it can be used for healthcare for me and my wife.

Later this year, we turn 55 so this lets me contribute an extra $1,000 to the “family” plan… a total contribution of $9550.

It seems though that my wife could now set up her own HSA at Fidelity to get her $1,000 catchup. Do I have that right?

If so, I wonder if it’s worth it for an account that won’t grow much since she can only contribute $1k per year.

 

[Flieger]

Yes. I have done this for a number of years now.

Flieger

 

[Kings over Queens]

I have an HSA at Fidelity that is under my name but the funds from it can be used for healthcare for me and my wife.

Later this year, we turn 55 so this lets me contribute an extra $1,000 to the “family” plan… a total contribution of $9550.

It seems though that my wife could now set up her own HSA at Fidelity to get her $1,000 catchup. Do I have that right?

If so, I wonder if it’s worth it for an account that won’t grow much since she can only contribute $1k per year.

Yes, and yes, it's worth it. In my view anyway.

The $1,000 is going to grow at the same rate in her own account as it would in the account with the larger balance, assuming you invest in the same funds across the accounts.

I missed one year of catch up for my wife and am pissed about it.

 

[MercyMe]

Thank you all for the replies. It is our high deductible ACA insurance policy that qualifies us for the HSA.

Would I have to link the new HSA account to the existing insurance policy somehow?

 

[Flieger]

Thank you all for the replies. It is our high deductible ACA insurance policy that qualifies us for the HSA.

Would I have to link the new HSA account to the existing insurance policy somehow?

Nope.

Flieger

 

[PaunchyPirate]

Thank you all for the replies. It is our high deductible ACA insurance policy that qualifies us for the HSA.

Would I have to link the new HSA account to the existing insurance policy somehow?

You do not need to use an HSA that is linked to your health plan in any way. My health plan provides one, but I ignore it and deposit my money into my Fidelity HSA. There is no linkage required. At tax time, you simply indicate that you did indeed have a high deductible plan for the period and that you deposited money into an HSA for the period. Again, no specific linkage at tax time either.

 

[MercyMe]

I love this forum!!!!

 

[MichaelB]

If so, I wonder if it’s worth it for an account that won’t grow much since she can only contribute $1k per year.

The benefit isn’t only the $1k in a tax exempt account, it’s also the tax savings on that $1k. If your marginal tax rate is 15% that’s another $150 you can save. If you do that for the 10 years (until Medicare) you have $10k plus growth in the HSA and $1.5k in tax savings.

I’d say it’d worth the effort.

 

[SecondCor521]

The benefit isn’t only the $1k in a tax exempt account, it’s also the tax savings on that $1k. If your marginal tax rate is 15% that’s another $150 you can save. If you do that for the 10 years (until Medicare) you have $10k plus growth in the HSA and $1.5k in tax savings.

I’d say it’d worth the effort.

Plus the ability to use those HSA dollars for medical expenses. If you have a $1K medical expense, you can earn maybe $1300, pay $300 in fed/state income taxes, then pay the medical expense, or use $1K from the HSA. This additional $300 benefit is in addition to the above numbers.

 

[audreyh1]

Not all HSA contributions need to go to your account although if you are making contributions from your employer that may drive location assuming there is a benefit. DH and I had individual health insurance plans and separate HSA accounts from the get go. So we each made the same contribution each year to our own account.

Unless you turn 65 the same month the younger person can keep contributing until the month they turn 65.

 

[Kings over Queens]

Yes. I have done this for a number of years now.

Flieger

@Flieger I need some help.

My CPA can't square my extra 1,000 contribution to my wife's HSA. Do you have the IRS rule, or info to share to help me help him.

This is our situation, on the chance I made a mistake.

Wfie and I are both over 55. I have a High Deductible plan with her and son covered (family). She does not have her own health coverage, she is under mine.

I have an HSA that is funded through payroll deduction with company match and that includes my 1,000 catch up.

i opened a seperate hsa in wife's name and funded that with 1,000.

He can't figure it out and the computer wants to assess a penalty.

 

[MichaelB]

@Flieger I need some help.

My CPA can't square my extra 1,000 contribution to my wife's HSA. Do you have the IRS rule, or info to share to help me help him.

This is our situation, on the chance I made a mistake.

Wfie and I are both over 55. I have a High Deductible plan with her and son covered (family). She does not have her own health coverage, she is under mine.

I have an HSA that is funded through payroll deduction with company match and that includes my 1,000 catch up.

i opened a seperate hsa in wife's name and funded that with 1,000.

He can't figure it out and the computer wants to assess a penalty.

Is the 2024 contribution to your HSA $9300? That’s the standard of $8300 plus your catch-up of $1000. If it is not over that amount, you definitely can contribute $1000 to her HSA.

 

[audreyh1]

That $1000 contribution for your wife’s HSA account would be on a second Form 8889 with her name. Are you missing this second form?

 

[Kings over Queens]

Is the 2024 contribution to your HSA $9300? That’s the standard of $8300 plus your catch-up of $1000. If it is not over that amount, you definitely can contribute $1000 to her HSA.

Yes, I deferred 296.15 (26 pay checks) and my employer matched $61.51 (26 pay checks) for a total of $9,299.94 into my HSA account.

I found another thread/discussion where the instructions were to complete two 8889 forms, one for me and one for her. Waiting for the CPA to respond. He's perplexed by it and by his admission, "I've never had someone do this."

 

[Kings over Queens]

That $1000 contribution for your wife’s HSA account would be on a second form with her name. Are you missing this second form?

I think that's the problem. I'm not doing my return, CPA is on it.

 

[audreyh1]

I think that's the problem. I'm not doing my return, CPA is on it.

Someone else’s CPA made this same mistake recently, not having a form for each spouse’s HSA account.

We always had two HSA accounts and each had a Form 8889 for our contributions.

 

[Kings over Queens]

Someone else’s CPA made this same mistake recently, not having a form for each spouse’s HSA account.

Exactly, that's where I picked it up.

Just spoke with him and he's going to try that as the solution.

I really can't fault him when he tells me he's never had someone do what I did. And truth told, I didn't know I could do it until I saw a few threads on it here.

 

[Surewhitey]

Thanks for the heads up. I turn 55 this year...

 

[TickTock]

Someone else’s CPA made this same mistake recently, not having a form for each spouse’s HSA account.

Kings over Queens,

I think that was me. I don't recall exactly where the IRS instructions to have a separate form for each spouse are, but I can go back and find it for you if you continue to have issues with your CPA. It is in there - not that the IRS makes it easy to find...

 

[audreyh1]

It’s right there on Form 8889:

HSA Contributions and Deduction. See the instructions before completing this part. If you are filing jointly and both you and your spouse each have separate HSAs, complete a separate Part I for each spouse.

https://www.irs.gov/pub/irs-pdf/f8889.pdf

What might not be be obvious is that completing a separate Part I means a second form for the spouse HSA account. Same with Part II.

FWIW TurboTax handles this perfectly based on the interview process. It immediately created two forms when we started out each with our own HSAs.

 

[Kings over Queens]

Thank you for the follow up @audreyh1 and @TickTock. I spoke with him yesterday but this information is helpful if he cant get off the struggle bus. Really appreciate you following up and helping.