Question

How to Calculate Testing Period

Forum|Forum|7 years ago
June 1, 2019
1 reply
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I opened my first HSA account June 2016. I retained that account for the remainder of the year. As I understand it, I qualify for the Last Month Rule. How then do I calculate the testing period? I have not ever had an HSA before and therefore made no contributions to any HSA in 2015.

TurboTax Deluxe Online

D

dmertz

Employee

Your eligibility depends on the months in 2016 for which you had HSA-eligible HDHP coverage, not the date on which you opened the HSA account. If you were covered by this insurance on June 1, 2016 (and not on May 1, 2016 or earlier), you were covered for the last 7 months of the year.

For a calendar-year filer, the testing period is December 1, 2016 through December 31, 2017. Under the last-month rule, you must remain an eligible individual throughout that period, otherwise the contributions for the 5 months that you were not an eligible individual are subject to ordinary income tax in 2017 (since they were deducted or excluded from income in 2016) and to a 10% additional tax (but these do not become excess contributions).