This question was submitted by HSA reader Theresa. Send yours in to evan@hsaedge.com
Help, just watched your video on form 8889. Line 3 baffles me. What is entered on line 3 if you are NOT under age 55?? My husband is over 55 and I am under 55. He is the policy holder of the HSA. So does that mean I leave line 3 blank? So confused!
Thanks for your email. This certainly is confusing as upon review, I had not observed the nuance in making 55+ contributions when filing Form 8889 for HSA’s. You will see that filing Form 8889 for 55+ contributions depends on your age / plan coverage / marital status, so I’ll go through it in detail.
Background
To account for higher medical costs, and as an incentive for older HSA participants to increase their total savings, the IRS allows an additional $1,000 to be deducted from your taxes if you are over age 55. There are a few important things to consider regarding eligibility for this “catch up” contribution:
- Must be 55 at the end of the tax year (12/31)
- Cannot be on Medicare (see below)
- Must be an eligible individual with HDHP insurance
This is backed up by the IRS tax rules for HSA’s, regarding additional 55+ contribution:
Additional contribution. If you are an eligible individual who is age 55 or older at the end of your tax year, your contribution limit is increased by $1,000. For example, if you have self-only coverage, you can contribute up to $4,350 (the contribution limit for self-only coverage ($3,350) plus the additional contribution of $1,000).
HSA Contribution Limits for over 55
Thus, if you turn 55 during a year, you can contribute the entire $1000 to your HSA that year. Of course, if you are older than 55, you can also contribute that $1000 each year. In technical terms, this means that your HSA contribution limit is increased by that $1,000, so for 2016 this gives us a total of:
- Single coverage – $4,350 = ($3350 + $1000)
- Family coverage – $7,750 = ($6750 + $1000)
How 55+ Contributions are filed on Form 8889
There is actually a bit of nuance as to where the additional $1000 appears on HSA form 8889 when you file your taxes. Where this amount is taken into account strangely enough depends on your coverage type and if you are married. You can view this by viewing the Form 8889 Instructions and seeing how the flow chart works for Line 3. You will notice that if you are married on family coverage, you get diverted to Line 7. Here is how things break down:
- If 55+, single coverage, and unmarried – the $1,000 gets added to your single contribution limit on Line 3
- If 55+, family coverage, and unmarried – the $1,000 gets added to your family contribution limit on Line 3
- If 55+, family coverage, and married – the $1,000 goes on Line 7. For Line 3, enter your contribution amount without the $1,000
So to answer the original question, it sounds like your husband is 55+ and you are < 55, and that he is the primary holder of family coverage on the HSA. As such, you fall into the 3rd example above, so make sure that Form 8889 Line 3 is your family contribution limit (2015: $6,650) and Line 7 reflects your catch up contribution (2015: $1,000)
65+ with HSA and enrolled in Medicare
However, Uncle Sam is not as kind to seniors who are using their HSA and enrolled in Medicare. In fact, they do not allow contribution to HSA’s while enrolled in Medicare. This is applied on a pro rata basis, so if you are on Medicare for part of the year your contribution limit is reduced by that “partial” amount (percentage) for the year. Back to the IRS rules:
Enrolled in Medicare. Beginning with the first month you are enrolled in Medicare, your contribution limit is zero.
For example: You turned age 65 in July 2015 and enrolled in Medicare. You had an HDHP with self-only coverage and are eligible for an additional contribution of $1,000. Your contribution limit is $2,175 ($4,350 × 6 ÷ 12)
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