How will HSA contribution limit change with mid-year status change in 2025?

Thanks for explaining, but I'm still a little confused. Does this mean they can EACH contribute the individual maximum for the months after the change? Or is there some family cap that still applies even though they'll have separate HSAs?

Once you and your spouse have separate HSA-eligible coverage, you can each contribute up to the individual limit for those months. There's no combined family cap that applies after the separation of coverage - each HSA is treated independently. For your specific situation, you would be able to contribute the full family amount for the months you covered both of you, and then each of you could contribute the individual amount to your respective HSAs after the change. This actually could allow for higher total contributions than if you had family coverage all year.

Did it help you figure out if both you and your spouse could max out your individual HSAs after the split? I'm wondering if there's a way to optimize the total family contribution through the transition.

I'm skeptical about these tax tools. How accurate was it compared to what an actual accountant would tell you? I've been burned before by online calculators giving me wrong info.

The tool absolutely helped with optimizing our total family contribution. It showed me that we could actually contribute more overall by having separate HSAs for part of the year than if we'd stayed on family coverage the whole time. It laid out a month-by-month contribution strategy for both of us. As for accuracy, I was skeptical too initially. But I had my accountant review the calculations and he confirmed they were correct. The difference is that my accountant would have charged me for a consultation just to figure this out, while this tool handled the specific HSA calculation as part of its analysis. The documentation it provided was actually what I gave to my accountant to verify.

Wait how does this actually work? Does it just call the IRS for you or what? Seems too good to be true considering I've waited on hold for hours before.

Yeah right. Nothing gets you through to the IRS faster. They're understaffed and overwhelmed. I refuse to believe this actually works - it's probably just taking your money for something you could do yourself.

It uses a technology that navigates the IRS phone tree and waits on hold for you. When it reaches a human agent, it calls your phone and connects you directly to that agent. So you don't have to sit on hold yourself - you only pick up when there's actually someone ready to talk. I was definitely skeptical too. I've spent countless hours on hold with the IRS before. But this was completely different - I got the call back within about 15 minutes and was immediately connected to an agent who helped with my HSA question. No magic, just clever technology that waits on hold so you don't have to.

I thought the last-month rule only applied if you didn't have coverage earlier in the year? Can I really use this even though I'm switching from family to individual coverage mid-year?

The last-month rule applies regardless of your coverage situation earlier in the year. The only thing that matters is what coverage you have on December 1st. So yes, even when switching from family to individual coverage mid-year, you can still use this rule! The catch is you must maintain that same type of coverage (individual in your case) for the entire following year (the "testing period"). If you don't maintain eligibility throughout that testing period, you'd need to include the contribution in your income and pay an additional 10% tax on it. It's often simpler than doing the monthly calculation, but it does require that commitment to maintain coverage the following year. Otherwise, the month-by-month calculation is your safer bet.

This isn't accurate. Once you have separate individual coverage, you can EACH contribute up to the individual limit for those months. You're not restricted by the family limit anymore after the coverage changes.

You're right, and I should have been clearer. What I meant was during the months when one spouse is still covered under the other's family plan, but also has their own individual plan. That's when confusion can happen. In our case, I still had my husband on my family plan during a 60-day waiting period before his new job's insurance kicked in, but his HR department told him he could contribute the full individual amount immediately. That wasn't correct since he was still also covered under my family plan, and it caused us to go over the limit temporarily.

Great point about documenting the exact dates! I'm dealing with a similar transition and hadn't thought about potential gaps or overlaps in coverage. My wife's new job has a 30-day waiting period before benefits kick in, so I'm wondering if we should look into COBRA for that gap month to avoid any complications with the HSA eligibility rules. Also, thanks for mentioning the catch-up contributions - neither of us is 55 yet, but it's good to know that gets even more complex. The automatic contribution idea is brilliant too. I was planning to just calculate everything at the end of the year, but spreading it out monthly would definitely be safer and help avoid any over-contribution mistakes. Did you run into any issues with your HSA administrator when explaining the mid-year change? I'm worried they might not understand the calculation method and could flag contributions as excessive.