What Happens If You Go Over Your HSA Contribution Limit?

If you go over your HSA contribution limit, the excess is hit with a 6% excise tax, and that tax keeps applying every year the money stays in the account. You can avoid the penalty entirely by pulling the excess out (plus any earnings on it) before your tax filing deadline, including extensions. Miss that window and there are still ways to stop the penalty from recurring, but the first-year 6% is locked in.

The 6% Excise Tax

The penalty for excess HSA contributions is straightforward and punishing: 6% on every dollar of excess sitting in your account at the end of the tax year.¹ It reapplies every year until the excess is removed or absorbed by a future year’s unused contribution room. A $1,000 overcontribution left alone for three years costs $180 in excise tax alone, on top of losing any deduction on the excess itself.

If you contributed the excess personally, you get no deduction for it. If your employer contributed the excess and it wasn’t already included in your W-2 wages, you report it as “Other income” on your return.² The excise tax itself is calculated and paid on Form 5329.³

How to Tell If You Actually Overcontributed

The 2026 annual caps are $4,400 for self-only HDHP coverage and $8,750 for family coverage. If you’re 55 or older, you can add a $1,000 catch-up contribution. Every dollar deposited into the account counts toward that ceiling regardless of source: your own deposits, employer contributions, and payroll deductions through a cafeteria plan.²

Payroll contributions made through a salary reduction agreement are treated as employer contributions on your tax forms, even though the money came from your paycheck. They appear in box 12 of your W-2 with code W, not on the line for personal contributions. Miss that detail and you can double-count your own payroll deposits as new deductible contributions, which is one of the most common ways people slip over the cap.

Mid-year changes are the other big trigger. Switching from family to self-only coverage, losing HDHP eligibility because of a job change, or enrolling in Medicare all reduce your allowable amount. Medicare in particular is a trap for anyone approaching 65: Part A enrollment can be backdated up to six months (but never earlier than your 65th birthday), and any HSA contributions made during that retroactive period become excess.⁴

Fix It Before Your Tax Deadline

The cleanest correction is a “return of excess contribution” completed before your tax filing deadline, including extensions. For 2026 contributions, the unextended deadline is April 15, 2027. Filing Form 4868 for an automatic six-month extension pushes that to October 15, 2027.⁵ Done in time, the 6% excise tax doesn’t apply at all.³

Contact your HSA custodian and specifically request a corrective distribution. Do not treat this as a regular withdrawal; the custodian codes it differently and the tax treatment differs. The custodian calculates the net income attributable (NIA) to the excess, which is the earnings or losses the excess generated while sitting in the account. Both the excess principal and the NIA come out together.² If your HSA investments lost money, the NIA can be negative, and you’ll withdraw slightly less than the original excess.

The earnings portion is taxable in the year you make the withdrawal, reported as “Other income.” You do not deduct the withdrawn excess amount.² Your custodian issues Form 1099-SA reflecting the corrective distribution code.⁶

The Six-Month Safety Valve After Filing

Already filed your return on time and then realized you left excess in the account? The IRS allows corrective withdrawals up to six months after the unextended filing deadline. For 2026 returns, that’s October 15, 2027.²

To use this relief, file an amended return with “Filed pursuant to section 301.9100-2” written at the top, along with an amended Form 5329 showing the withdrawn contributions are no longer excess. Include an explanation of the withdrawal and report any earnings as other income.³ This option isn’t well publicized, and some tax preparers overlook it.

If You Miss Every Correction Window

Once every correction window has closed, the 6% excise tax for the year of the overcontribution is locked in. There’s no undoing that first-year hit. But you can still stop the penalty from recurring, and you have two ways to do it.

Absorb the Excess Into Next Year’s Limit

If you have unused contribution room in the following year, the leftover excess is effectively counted against that year’s cap. The IRS lets you deduct prior-year excess contributions still sitting in your HSA, up to the lesser of your unused contribution room for the current year or the total excess carried over.⁴ Say you overcontributed $800 in 2026 and only put $3,600 toward your $4,400 self-only limit in 2027. The remaining $800 of 2027 room absorbs the prior year’s excess.

Once absorbed, the 6% stops accruing.¹ You still owe the 6% for every year the excess sat uncorrected, but nothing further. Report the absorption on Form 5329 for the year it happens.³

Withdraw It Late

You can also just take the excess out after the deadline. The 6% applies for every year the money stayed in the account, and the withdrawn amount plus any earnings is included in your gross income. This route is more expensive, but it may be your only option if next year’s contribution room is too small to absorb the overage, or if you’re no longer HSA-eligible.

The Last-Month Rule Is a Separate Penalty

One situation doesn’t follow the correction pattern above. The last-month rule lets you contribute the full annual amount if you hold HDHP coverage on December 1, even without a full year of eligibility. The trade-off is a “testing period”: you must remain HDHP-eligible through December 31 of the following year.⁴

Break the testing period and the contributions that were only allowed because of the rule become taxable income in the year you lose eligibility, plus a 10% additional tax on that amount. This is separate from and on top of regular income tax, and it isn’t fixed through a return-of-excess withdrawal. The only exceptions are losing eligibility due to death or disability. The penalty is reported on Part III of Form 8889.²

When Your Employer Caused the Overcontribution

A duplicate deposit, a data entry mistake, or a salary reduction processed at the wrong amount can push you over without any action on your part. In those cases, the employer can ask your HSA custodian to return the funds directly. Under IRS guidance, custodians may return mistaken employer contributions when there’s clear documentation of an administrative error. The correction should ideally happen by December 31 of the contribution year. After that, the employer may need to adjust your W-2 to reflect the excess as taxable wages.

If your employer won’t fix it or misses the year-end window, resolving the excess falls back on you through the standard correction methods above. Check your W-2 box 12 (code W) against the total employer and cafeteria plan contributions to your account before the year closes.²

Forms You’ll File

An HSA overcontribution touches up to three IRS forms.

Form 8889 goes with your return every year you have an HSA. It’s where total contributions, deductible amount, and any excess get reported, and where the last-month rule testing period penalty is calculated.²
Form 5329 calculates and pays the 6% excise tax, or documents that you’ve corrected the excess and owe nothing.³
Form 1099-SA is issued by your custodian for any distribution, including corrective withdrawals. The distribution code tells the IRS whether it was a standard withdrawal or a return of excess.⁶

Skipping Form 5329 when you owe the excise tax can bring an IRS notice, and the statute of limitations on that penalty doesn’t begin running until the form is filed. Even if you’ve corrected the excess and owe nothing, filing 5329 to document the fix creates a clean paper trail.

1
Office of the Law Revision Counsel. 26 U.S. Code 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts
2
Internal Revenue Service. Instructions for Form 8889 – Health Savings Accounts
3
Internal Revenue Service. Instructions for Form 5329 – Additional Taxes on Qualified Plans and Other Tax-Favored Accounts
4
Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
5
Internal Revenue Service. Publication 509 – Tax Calendars
6
Internal Revenue Service. Instructions for Forms 1099-SA and 5498-SA