What is HSA? It is telling me my employer said excessive $1355 how?

we have no access to your return or documents. HSA employer and employee contributions are shown on line 12w of the w-2. you must complete the Turbotax worksheet for the HSA. otherwise, it will show this as an excess. the max on line 12w:

for each month you had a self-only HDHP coverage the contribution limit is $4150/12

it's double this for each month (on the 1st day of the month) of family HDHP coverage.

the exception to the above is if you had HDHP coverage on 12/1/2024. then you can make the maximum annual contribution based on the type of coverage. if you were married and had family HDHP all year, the HSA contribution limit for both of you is $8300 split any way you want.

An HSA is a tax-advantaged account that you can use to pay for qualified medical expenses. Contributions to the HSA are exempt from income tax.

However, there is a limit to how much you can contribute to your HSA each year. The limit depends on a number of things: 

• did you have HDHP health insurance coverage, 
• if so, was it Family or Self-only, 
• for how many months did you have HDHP coverage, 
• what is the age of the owner of the HSA, 
• and so on?

TurboTax calculates your annual HSA contribution limit from the entries you made in the HSA interview. The message about the $1,355 that is excess, means that you (and/or your employer) contributed $1,355 more than your limit.

If this is true (and you should review your entries in the HSA interview), then TurboTax will ask you how much you want to withdraw. If you can withdraw it, this is the cheapest solution.

Note, however, it is easy to accidently enter data that makes TurboTax think that you made excess contributions when you really didn't. Here are common reasons how this can happen:

One of the purposes of the HSA interview is to determine your annual HSA contribution limit.

 

As you probably know, the maximum limits in 2024 are:

• $4,150 - individual with self-coverage
• $8,300 - individual with family coverage
• If the HSA owner is 55 or older, then you add $1,000 to these amounts.

 

However, these limits assume that you were in an HSA all year. If you left the HSA during the year or started Medicare or had one of a number of change events, then the limit is reduced. 

 

There are several major culprits for excess contributions (other than just actually contributing more than the limit). 

 

First, if you did not complete the HSA interview - that is, go all the way until you are returned to the "Your Tax Breaks" page - the limit still might be set to zero, causes a misleading excess contribution message. 

 

There are questions all the way to the end of the interview that affect the annual contribution limit.

 

Second, it is not unusual for taxpayers to accidentally duplicate their contributions by mistakenly entering what they perceive to be "their" contributions into the second line on the "Let's enter your HSA contributions" screen.

 

Normally, any employee who made contributions to his/her HSA through a payroll deduction plan has the contributions included in the amount with code "W" in box 12 on the W-2. This is on the first line on this screen (above). Don't enter the code W amount anywhere on the return other than on the W-2 page.

 

Third, if you weren't in HDHP coverage all 12 months, then the annual contribution limit is reduced on a per month ratio. NOTE, this means that you have to indicate when and under what type of HDHP plan you had. Be sure to answer the questions on the screen entitled "Was [name] covered by a High Deductible Health Plan in 2024?".

 

Fourth, if you had a carryover of excess contributions from 2023, then this carryover is applied to 2024 as a reduction to the 2024 HSA contribution limit, which could cause an excess condition in 2024 as well. But note: if you had an excess contribution in 2023 but cured it by withdrawing the excess in early 2024, then do NOT report an "overfunding" on your 2024 return.

 

Fifth, the Family limit ($8,300) is for the aggregate of contributions by both taxpayers, even if both taxpayers have their own HSAs. That is, one taxpayer can’t contribute $8,300 to his/her HSA and the other contribute $4,150 to the other HSA – the $8,300 limit applies to the aggregate of all HSA contributions credited to the family (in this case, the excess contributions would be $4,150).