8889 HSA Unequal Months Coverage for Spouses

[Tributos]

a) Both Spouses have 'family coverage' for different months throughout the year. Neither of them has coverage in the same month, or for December. The first is covered for two months & the other is covered for six months in 2023 (amended return).

b) From the Line 3 worksheet, I've calculated f8889 Line 3 separately for TP & Spouse as $3,875 [6 mos.* $7,750/12] and $1,292 [2 mos.*7,750/12] as they are not covered for each month and at no time are they covered in the same month.

c) On f8889 following the instructions & the example, I understand that they are NOT eligible for the family contribution of $7,750 on Line 6 but will list the amounts in 'b' above of $3,875 for TP and $1,292 for spouse. Appreciate feedback - thank you.

Haven't encountered this type of split yet and questioning the process if I'm correctly applying the instructions. It does make sense to reduce the contribution level as they did not have the months of coverage that a couple is required to receive the full $7,750. The are being hit with over $100 of tax on excess contributions on f5329 Part VII.

[qbteachmt]

"separately for TP & Spouse as $3,875 [6 mos.* $7,750/12]"

Where did $3,875 come from?

"in 'b' above of $3,875 for TP and $1,292 for spouse."

For tax year 2023, Family coverage for HSA gives a contribution limit of $7,750. You don't split that as if that is equal into individual limits. The combined or shared limit, no matter which HSA accounts get contributed to, is the family limit. For instance, one might have the coverage through an employer and that employer provides towards contribution, so it can all go into the one HSA account.

An exception is the catch up provision, since it is age-related, has to go to the HSA of the person attaining the age, even if they covered under their spouse's employer family plan.

For instance, a person with a family plan gets $7,750/12 for the month's limit, but they share that with the spouse. It can be split however they want to, as HSA accounts stand individually but the person making the contribution is only eligible because they are covered appropriately.

An adult child (up to age 26) is allowed to be on the family plan. If they cannot be claimed as a dependent, they are entitled to their own Family Limit HSA contribution for that year, of $7,750, in addition to the parents having to share/split their contribution.

Example:

Paul is 55 and Mary is 50 and her employer offers the family medical plan qualifying coverage and an HSA amount and Junior is 25 and employed.

Paul puts $1,000 into his HSA.

Junior puts $7,750 into his HSA.

Mary's employer puts $1,500 into her HSA.

Mary puts $7,750 minus $1,500 = $6,250 into her HSA.

[Tributos]

I believe I follow your response, though does it consider those who do not have a full year of coverage or coverage? I will try to better explain --- ok, here we go . . . 

Line 3 (#5) If you were not an eligible individual on the first day of the last month of your tax year,

use the Line 3 Limitation Chart and Worksheet (in these instructions) to determine the amount to enter on line 3. (See (6) in this list.)

***The taxpayer had coverage Mar – Aug (6 mos.) so, he was not covered on 12/1/23 and the spouse had coverage Jan – Feb (2 mos.) also not covered on 12/1/23 *** The limitation worksheet prorates the contribution limit with the TP eligible to take $3,875 and the spouse $1,292 for Line 3

using worksheet for line 3:

TP coverage is 6 mos. [Mar - Aug.] or 6* 7750/12 mos. = $3,875

Spouse coverage is 2 mos. [Jan - Feb] or 2*7750/12 mos. = $1,292

Total amount is $5,167 vs. $7,750 as they were not covered all months.

Line 6 f8889-Enter the amount from line 5. But if you and your spouse each have separate HSAs and had family coverage under an HDHP at any time during 2023, see the instructions for the amount to enter:

If you are not treated as having family coverage for each month, use the following steps to determine the amount to enter on line 6 (summarized)

1. Refigure the contribution limit that would have been entered online 5 if you had entered on line 3 the total of the worksheet amounts only for the months you were treated as having family coverage when refiguring line 5, use the same amount you previously entered on line 4.

In this case f8889 Line 4 is blank – no MSA’s --- so Line 3 carries to Line 5

1. Divide the reconfigured contribution limit from step one equally between you and your spouse unless you both agree on a different allocation.

I looked at different splits between the total contribution amount (3,875 + 1,292) or $5,167

My understanding is that if either of them were covered on 12/1/23 they would be eligible for $7,750

1. Subtract the part of the contribution limit allocated to your spouse in Step 2 from the amount determined in step one.

Step one contribution limit $5,167 – spousal portion = $3,875- so, I really don’t know what the instructions are trying to achieve here, except maybe to make sure the allocated amounts do not exceed the total amount of contributions that are available to use as a deduction.

1. Determine any other contribution limits that apply for the tax year and add that amount to the result in Step 3 enter the total on line 6.

No other limits to apply so Line 6 remains the same for the TP [3,875] and spouse [1,292]

This couple does not have full year coverage, so I don’t find they are eligible for the $7,750.

[qbteachmt]

Yes, they are explaining what I noted. When they made the contributions, they had 1 account or 2 accounts. They used the HSA account(s) for receiving contributions simultaneously or concurrently or consecutively, or decided that the contribution should only go to the HSA for the person having the policy, each time.

Since these were always family plans, it doesn't matter if they only had 1 account or who had that one account vs the policy. What matters is that their combined contribution doesn't exceed their allowed contribution. The employer share, if any, from payroll, is treated as from the employee, as well.

[Tributos]

'What matters is that their combined contribution doesn't exceed their allowed contribution.'

Yes, that's it exactly and the process of figuring that per the instructions are anything but clear. 

Using the prorated amount adjusts for the months of 'non-coverered' contributions. 

I'm resting on the calculations, more confident that I could defend them if needed.