Guides › HSA Mistakes: Excess Contributions, Medicare, Withdrawals

HSA Mistakes: Excess Contributions, Medicare, Withdrawals

Short answer: The common HSA mistakes in IRS Pub. 969 are contributing more than your limit (a 6% excise tax each year the excess stays), contributing after Medicare enrollment starts, using HSA money for non-qualified expenses (income tax plus a 20% additional tax), and not filing Form 8889.

1. Excess contributions

• Excess contributions aren't deductible. Employer excess is included in your gross income. You pay a 6% excise tax (Form 5329) for each tax year the excess remains.
• You can avoid the tax by withdrawing the excess and any income on it by the due date, including extensions, of your return for the year of the contribution (Pub. 969 lists conditions).
• Count employer contributions and all HSAs together.

2. Medicare

From the first month you're enrolled in Medicare, your contribution limit is zero, including retroactive coverage. Contributions in a retroactive period are considered excess.

3. Non-qualified withdrawals

Distributions not used for qualified medical expenses are taxable and may carry an additional 20% tax (Form 8889). Pub. 969 lists exceptions in the full text; we do not restate them here.

4. Last-month rule slip-ups

Testing period: losing eligibility early can make contributions taxable plus 10%.

5. Form 8889

File Form 8889 with your return if you or your spouse had HSA activity; each person has their own HSA and form.

6. Other

• Expenses before establishing the HSA aren't qualified.
• Joint HSAs don't exist.
• FSA conflicts: see.

Fix-it checklist

1. Total contributions (yours, employer's, all HSAs).
2. Compare with the limit and your eligible months.
3. If excess, ask your trustee about a corrective distribution before the due date.
4. Keep records and talk to a tax professional.

FAQ

Is the 6% a one-time tax? Pub. 969 says it applies to each tax year the excess stays in the account.

Do trustee fees count as distributions? Pub. 969 says administration and maintenance fees withdrawn by the trustee aren't reported as distributions.

What we could not verify

• The 2026 edition of Pub. 969 (we read the 2025 edition) and Form 5329/8889 instructions.
• Exceptions to the 20% tax in detail.

Sources (official)

• IRS, Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans (Feb 11, 2026 print; for 2025 returns) — https://www.irs.gov/publications/p969 (read October 17, 2026)
• IRS, Rev. Proc. 2026-24 (2027 HSA, HDHP, DPCSA and HRA amounts) — https://www.irs.gov/pub/irs-drop/rp-26-24.pdf (read October 17, 2026)

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Not tax/financial advice. Examples use made-up figures and have not been reviewed by a tax professional. See the disclosure.