Form 8889 Example: How to Complete It for Family HSA Contributions

Form 8889 is used to report contributions, withdrawals, and tax benefits related to a Health Savings Account (HSA). If you or your family contribute to an HSA, completing this form correctly ensures you receive the appropriate tax advantages while avoiding penalties.

Understanding how to fill out Form 8889 properly is essential for maximizing deductions and ensuring compliance with IRS rules.

Data Needed for Completing Form 8889

Before filling out Form 8889, gathering the necessary financial records ensures accuracy and prevents errors that could lead to IRS scrutiny. The form requires detailed information about contributions, distributions, and account eligibility, all of which must align with IRS regulations to avoid penalties or disallowed deductions.

One key detail is the total amount contributed to the HSA during the tax year, including personal contributions and any made on behalf of a spouse or dependents if filing jointly. The IRS sets annual contribution limits, which for 2024 are $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up contribution for those 55 and older. Contributions exceeding these limits are subject to a 6% excise tax.

Eligibility for an HSA requires a high-deductible health plan (HDHP), which must meet IRS-defined minimum deductible and maximum out-of-pocket expenses. For 2024, the minimum deductible is $1,600 for self-only coverage and $3,200 for family coverage, with out-of-pocket maximums of $8,050 and $16,100, respectively. This information is typically found on insurance documents.

Taxpayers must also report any HSA withdrawals. Distributions used for qualified medical expenses are tax-free, while non-qualified withdrawals are subject to income tax and a 20% penalty unless the account holder is 65 or older, disabled, or deceased. Keeping receipts and documentation is necessary to substantiate tax-free withdrawals in case of an audit.

Step-by-Step Completion

Filling out Form 8889 requires careful attention to detail. The form is divided into sections covering direct contributions, employer contributions, and distributions. Each section must be completed accurately to avoid tax penalties or missed deductions.

Direct HSA Contributions

This section reports contributions made directly by the taxpayer or their family members. Line 2 requires the total amount contributed during the tax year, excluding employer contributions. Contributions made after the end of the tax year but before the tax filing deadline (April 15, 2025, for the 2024 tax year) can still be included.

Excess contributions must be withdrawn before the tax deadline to avoid a 6% excise tax. Line 3 asks whether the taxpayer was eligible for the last-month rule, which allows those eligible on December 1 to contribute the full annual amount even if they were not eligible for the entire year. However, they must remain eligible for the entire following year to avoid penalties.

Employer HSA Contributions

Employers may contribute to an employee’s HSA, and these amounts must be reported on Form 8889. Line 9 requires the total employer contributions, which are also reported in Box 12 of the employee’s W-2 with code W. These contributions are not included in the taxpayer’s gross income and are not deductible.

If an employer contributes more than the allowable limit, the excess amount is taxable unless withdrawn before the tax deadline. Unlike personal contributions, excess employer contributions cannot be deducted or adjusted by the taxpayer. If an employee has multiple HSAs, total contributions from all sources must still stay within the IRS limits.

Qualified Withdrawals

HSA distributions used for qualified medical expenses are tax-free but must be reported on Form 8889. Line 14a requires the total amount withdrawn during the tax year, while Line 15 asks for the portion used for qualified medical expenses. Any remaining amount is subject to income tax and a 20% penalty unless an exception applies.

Qualified medical expenses include doctor visits, prescriptions, and certain over-the-counter medications, as defined by IRS Publication 502. Non-qualified withdrawals, such as using HSA funds for general expenses, are taxable and penalized unless the account holder is 65 or older, disabled, or deceased. Receipts and records should be kept to substantiate withdrawals. If an HSA distribution was mistakenly taken but not spent, it can be returned to the account before the tax deadline to avoid penalties.

Adjusting Contributions or Deductions

Maximizing HSA tax benefits often requires adjusting contributions or deductions based on changing financial circumstances. Since HSAs allow tax-deductible contributions and tax-free growth, ensuring the correct amounts are reported is necessary for optimizing tax savings while avoiding penalties.

A mid-year change in employment or health coverage may require recalculating contributions to stay within the annual limit. If a taxpayer moves from self-only to family coverage—or vice versa—their contribution ceiling changes.

Participation in other tax-advantaged accounts also affects HSA contributions. A limited-purpose Flexible Spending Account (FSA), which covers dental and vision expenses, does not affect HSA eligibility, but a general-purpose FSA does. Ensuring compliance with IRS coordination rules prevents unintended tax liabilities.

Since HSA contributions for a given tax year can be made up until the filing deadline—April 15 of the following year—taxpayers have flexibility to make last-minute contributions to maximize deductions. This can be beneficial if income shifts unexpectedly, such as receiving a year-end bonus that pushes a taxpayer into a higher bracket.

Family Filing Scenarios

When a household has multiple individuals covered under a single HDHP, determining how to allocate HSA contributions and deductions requires careful planning. Married couples must decide whether to maintain separate HSAs or contribute to one spouse’s account. Since HSAs are individually owned, a joint HSA does not exist, meaning each spouse must establish their own account if they both wish to contribute separately. If only one spouse has an HSA, the total family contribution limit still applies, but the account owner controls the funds and deductions.

For families with adult children covered under a parent’s HDHP, contribution rules become more complex. While a child under 26 may remain on a parent’s insurance, they cannot use the parent’s HSA unless they qualify as a tax dependent. If the child is financially independent, they must open their own HSA to make tax-advantaged contributions, even if the parent pays their medical expenses.

Reporting on Your Return

Once Form 8889 is completed, the next step is ensuring the information is correctly reported on Form 1040. Since HSA contributions and distributions directly impact taxable income, errors can lead to miscalculations in tax liability or IRS scrutiny.

The deductible portion of HSA contributions, after accounting for employer contributions, is reported on Schedule 1 of Form 1040, Line 13. This deduction reduces adjusted gross income (AGI), which can lower overall tax liability and potentially increase eligibility for other tax credits. Excess contributions not withdrawn before the deadline are reported on Schedule 2, Line 8, and are subject to a 6% excise tax. If distributions were used for non-qualified expenses, the taxable portion is included on Line 8 of Schedule 2, with the 20% penalty applied unless an exception applies.

Proper documentation, including Form 5498-SA (which reports total contributions) and Form 1099-SA (which details distributions), should be retained in case of an IRS inquiry.