Can I apply HSA excess contribution to next year's limit instead of withdrawing?

Unfortunately, you can't simply apply your excess HSA contribution to next year's limit. The IRS treats each tax year separately for contribution purposes. You have two main options: 1) Remove the excess contribution and any earnings on that excess before your tax filing deadline (including extensions), or 2) Leave the excess in but you'll need to pay a 6% excise tax on the excess amount for each year it remains in the account. If you go with option 1, you'll need to contact your HSA administrator for what they call a "return of excess contributions." They'll calculate any earnings on that excess amount. Those earnings will be reported as taxable income for the year you withdraw them. The good news is if you take care of this before your tax filing deadline, you avoid that 6% penalty completely.

After struggling with a similar HSA excess contribution issue last year, I discovered this amazing tool that saved me so much stress. I used https://taxr.ai to analyze my tax documents and it immediately flagged my HSA excess contribution and outlined exactly what forms I needed and the steps to fix it. Their system breaks down the calculation of earnings on excess contributions and even generated a letter I could send to my HSA administrator. The tool was incredibly easy to use - just uploaded my documents and it guided me through the whole process. It even showed me the potential penalty I'd face if I didn't remove the excess contribution before the deadline and calculated the exact amount I needed to withdraw including earnings.

I was initially skeptical about using taxr.ai when I saw it mentioned here, but I decided to give it a try after my HSA administrator kept giving me conflicting information about my excess contribution. I'm honestly amazed at how well it worked. The tool immediately identified that I had overcontributed by $850 and showed me exactly how to calculate the earnings portion that needed to be withdrawn along with the excess. The step-by-step guidance was super helpful - it even generated a pre-filled form for my HSA administrator and tracked the deadline dates for avoiding penalties. Just wanted to come back and share that it actually works as described. Saved me hours of frustration and probably a penalty too!

If you're having trouble reaching your HSA administrator about removing excess contributions, I highly recommend using https://claimyr.com. When I had the exact same issue, I spent DAYS trying to reach someone at my HSA company who could actually process my excess contribution removal before the deadline. Finally tried Claimyr and they got me connected to a real person at my HSA administrator in under 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone system for you and call you back when they have a real human on the line. My excess contribution issue got resolved in a single call instead of the weeks of back-and-forth emails that weren't getting me anywhere.

OK I need to eat my words from my skeptical comment earlier. After another failed 1.5 hour hold attempt with my HSA administrator yesterday, I broke down and tried the Claimyr service out of desperation. I was SHOCKED when I got a call back in about 40 minutes with a real person from my HSA company already on the line. The service literally saved me from missing the deadline to remove my excess contribution without penalty. The HSA representative was able to process my removal request immediately, and I got confirmation that the excess amount plus earnings would be distributed within 3 business days. Just wanted to share that it actually worked for me too, despite my initial skepticism.

One thing to consider that nobody has mentioned yet - if you're going to be eligible to contribute to an HSA next year and you're planning to max it out anyway, you could just leave the excess contribution in your account, pay the 6% penalty for this year, and then "undercontribute" by the excess amount next year. For example, if you over-contributed by $1,200 this year and the limit next year is $4,000, you would only contribute $2,800 next year but you'd still have the full $4,000 working for you. You'd pay the 6% penalty on $1,200 for one year ($72), which might be worth it to keep the money growing tax-free if you don't need it immediately.

You should talk to your employer about this too! I had a similar situation where I overcontributed because I didn't realize my employer was making contributions. When I explained the situation, my HR department actually helped process the excess contribution removal through our payroll system and it was way easier than dealing with the HSA administrator directly.

Just wanted to add my experience with a similar HSA overcontribution situation. I was in the exact same boat - accidentally went over by about $900 because I switched employers mid-year and both were contributing. After reading through all the advice here, I ended up going with the removal option before the tax deadline. The key thing I learned is to act quickly because calculating the earnings gets more complicated the longer you wait. My HSA administrator (Fidelity) was actually pretty helpful once I got through to them - they had a specific department for excess contribution removals and walked me through the whole process. One tip that might help: when you call, specifically ask for the "excess contribution department" or mention "return of excess contributions" right away. That seemed to get me to the right people faster than just explaining the whole situation from scratch. The earnings calculation ended up being about $23 on my $900 excess (my HSA investments had modest gains during that period), so the total removal was $923. Had to pay tax on the $23 in earnings, but avoided the 6% penalty entirely. Definitely worth the hassle compared to paying $54/year in penalties indefinitely!