Form 8889 (2013)—Health Savings Accounts (HSAs) Checklist
Purpose
Form 8889 calculates HSA deductions and reports distributions for the 2013 tax year. Filers under age 55 with self-only HDHP coverage can claim a maximum annual deduction of $3,250; family coverage allows a deduction of $6,450. Part III addresses failure to maintain HDHP coverage, income inclusion, and the resulting 10% penalty tax. This testing period requirement applies when using the last-month rule or making qualified HSA funding distributions and has been part of HSA rules in prior and subsequent tax years.
Eligibility Verification
Step 1: Confirm HDHP Coverage and Eligible Individual Status
Verify you were covered under a qualifying high-deductible health plan on the first day of each month during 2013. For self-only coverage, the minimum annual deductible is $1,250, with a maximum out-of-pocket expense of $6,250. For family coverage, the minimum annual deductible is $2,500, with a maximum out-of-pocket expense of $12,500 per year. Ensure you have no other disqualifying health coverage except permitted coverage, such as accident insurance, disability coverage, dental care, vision care, long-term care, and workers’ compensation. You cannot be enrolled in Medicare or claimed as a dependent on another person’s tax return.
Step 2: Determine Your Coverage Type for the Year
Enter your HDHP coverage type on line 1. Check “self” only if you had individual coverage, or "family" if you had family coverage. If you had both types of coverage during the year, mark the box for the coverage in effect as of December 1, 2013. If covered by both simultaneously, you are considered to have family coverage during that period. This selection determines your maximum contribution limit.
Step 3: Report Personal Contributions and Calculate Maximum Limit
Enter total personal HSA contributions on line 2, including contributions made between January 1 and April 15, 2014, that were designated for 2013. Exclude employer contributions, cafeteria plan amounts, and rollovers. On line 3, enter your maximum contribution: The maximum contribution limit is $3,250 for self-only HDHP coverage or $6,450 for family HDHP coverage, provided you were eligible for the entire year. If you changed coverage during the year or were not eligible for all 12 months, use the Line 3 Limitation Chart and Worksheet to calculate your prorated maximum.
Step 4: Adjust for Archer MSA and Apply Spousal Allocation
Subtract any Archer MSA contributions from line 3 and enter the result on line 5. If both spouses had family HDHP coverage during 2013, include spouse Archer MSA contributions to prevent double contribution allowances. On line 6, apply spousal allocation rules if married filing jointly with both spouses maintaining separate HSAs. Divide the family coverage limit equally unless you agree on a different allocation, such as allocating nothing to one spouse.
Step 5: Add Age 55 or Older Catch-Up Contributions
If you were age 55 or older on December 31, 2013, calculate your additional catch-up contribution on line 7. For unmarried individuals or those with self-only coverage, you may add up to $1,000. For married individuals with family coverage who were eligible all 12 months, enter $1,000. If you were eligible for fewer months, use the Additional Contribution Amount Worksheet: multiply $1,000 by the number of eligible months, then divide by 12.
Step 6: Account for Employer and IRA Funding Contributions
Enter employer contributions on line 9, using amounts reported in box 12 of Form W-2 with code W. If employer contributions for 2012 appear in your 2013 W-2 or if 2013 contributions were made in 2014, use the Employer Contribution Worksheet to determine the correct amount. On line 10, enter any qualified HSA funding distribution, which is a one-time direct trustee-to-trustee transfer from your IRA to your HSA. This amount reduces your contribution limit and is subject to a 12-month testing period.
Step 7: Calculate Your Deductible HSA Contribution
On line 12, subtract employer contributions and qualified HSA funding distributions from your maximum contribution limit. If the result is zero or negative, enter zero. The HSA deduction on line 13 equals the lesser of your personal contributions from line 2 or the calculated allowance from line 12. The result is your deductible HSA contribution for 2013. Enter this amount on Form 1040, line 25.
Step 8: Report Total Distributions and Qualified Medical Expenses
Enter all 2013 HSA distributions on line 14a, including amounts shown in box 1 of Form 1099-SA. This includes distributions made with HSA debit cards and amounts withdrawn by individuals designated by the account holder. On line 14b, list rollovers to another HSA and excess contributions with earnings withdrawn by the return due date, including extensions.
On line 15, enter qualified medical expenses paid using HSA distributions in 2013. These include unreimbursed medical expenses for yourself, your spouse, and all dependents you claim on your return that could otherwise be deducted on Schedule A. Only include expenses incurred after you established your HSA.
Step 9: Calculate Taxable Distributions and Additional Tax
Subtract qualified medical expenses from total taxable distributions to determine the amount on line 16 that must be included in gross income. On line 17a, check the box if you meet any exception to the 20% additional tax: age 65 or older, disabled, or deceased when distributions were made. On line 17b, calculate 20% of taxable distributions that do not meet any exception. Report this additional tax on Form 1040, line 60. Mark box C on line 60 and write “HSA” in the space next to that box to properly identify the additional tax.
Step 10: Address Last-Month Rule and Qualified HSA Funding Distribution Failures
Complete Part III only if you used the last-month rule or received a qualified HSA funding distribution and failed to remain an eligible individual during the testing period. The testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month. For example, if you were eligible on December 1, 2013, using the last-month rule, your testing period runs through December 31, 2014.
On line 18, enter the amount of contributions that would not have been made without the last-month rule. Use the Line 3 Limitation Chart and Worksheet from 2013 to calculate the contribution limit without applying the last-month rule, then subtract this from your actual contribution. On line 19, enter any qualified HSA funding distribution amounts that must be included in income due to testing period failure. Multiply the total from lines 18 and 19 by 10% to determine the additional tax on line 20. Include this amount on Form 1040, line 60, box c, identifying it as “HSA.”
Step 11: Handle Multiple HSAs and Spousal Forms
If you are the beneficiary of two or more HSAs during 2013, complete a separate Form 8889 for each account. Mark each as “statement” at the top, then prepare a controlling Form 8889 combining amounts from all statement forms. Attach statements after the controlling form. If you are married and filing jointly and both spouses have HSAs, complete a separate Form 8889 for each spouse. Combine the amounts from line 13 of both forms and enter the total on Form 1040, line 25. Attach both completed Forms 8889 to your tax return.
Step 12: Address Excess Contributions and Death of Beneficiary
If your contributions exceed your deduction limit, you may have excess contributions subject to a 6% excise tax reported on Form 5329. You can withdraw excess contributions by the return due date, including extensions, to avoid the penalty. Include any earnings on withdrawn contributions as other income on your return for the year of withdrawal. If you acquired an HSA because of the account beneficiary’s death, follow special reporting rules. Surviving spouses treat the HSA as their own and complete Form 8889 in the same manner as individuals. Other beneficiaries enter “Death of HSA account beneficiary” at the top of Form 8889, skip Part I, enter the fair market value as of the date of death on line 14a, and complete the rest of Part II.
Step 13: Verify Medicare Impact and Documentation Requirements
You cannot make or deduct HSA contributions for any month in which you were enrolled in Medicare. If you enrolled in Medicare during 2013, reduce your contribution limit accordingly using the monthly proration method. Medicare enrollment affects your eligible individual status for contribution purposes, but does not prevent qualified distributions for medical expenses.
You must file Form 8889 if you or someone on your behalf made contributions to your HSA for 2013, if you received HSA distributions in 2013, or if you must include amounts in income due to testing period failure. Attach Form 8889 to Form 1040 or Form 1040NR even if you have no other filing requirement. If you or your spouse received HSA distributions in 2013, you must file Form 8889 with Form 1040 even if you have no taxable income or any other reason for filing.
Step 14: Maintain Proper Records and Final Review
Maintain records of all qualified medical expenses paid with HSA distributions. Keep receipts, invoices, and other documentation that clearly show the nature and amount of costs. You cannot deduct on Schedule A any medical expenses you include on Form 8889, line 15. Retain copies of Form 8889, Form W-2 showing employer contributions, Form 1099-SA showing distributions, and documentation of qualified medical expenses for at least three years from the filing date.
Before filing, verify all calculations. Confirm contribution limits match your coverage type and eligible months. Check that distributions are properly allocated between qualified expenses and taxable amounts. Ensure that additional taxes are correctly calculated and reported on the appropriate Form 1040 lines, using the proper identification codes. Review that employer contributions on line 9 match Form W-2 box 12 code W amounts after adjusting for contributions made in different tax years.
Step 15: Understand Insurance Premium Exceptions and Qualified Medical Expenses
Generally, you cannot treat insurance premiums as qualified medical expenses. However, exceptions exist for long-term care insurance, health care continuation coverage (such as COBRA), health care coverage while receiving unemployment compensation under federal or state law, and Medicare and other health care coverage if you are 65 or older. Medicare supplemental policies, such as Medigap, do not qualify.
For COBRA and unemployment coverage, the premium can cover your spouse or dependent. If you are under age 65, Medicare premiums for your spouse or dependents who are age 65 or older generally are not qualified medical expenses. Only prescribed medicines or drugs, including over-the-counter medicines and those specified, as well as insulin, even if purchased without a prescription, qualify as medical expenses.
Non-prescription medicines, apart from insulin, are not considered qualified medical expenses. Qualified medical expenses include medical care for yourself, your spouse, and any person you could have claimed as a dependent on your return, including children of divorced or separated parents who are treated as dependents of both parents.
Checklist Completion
This comprehensive checklist covers all essential aspects of completing Form 8889 for the 2013 tax year. By following these 15 steps systematically, you ensure accurate reporting of HSA contributions, distributions, and any applicable additional taxes. The form integrates with your Form 1040 through the HSA deduction on line 25 and any additional taxes on line 60. Proper completion prevents penalties and ensures you receive the full tax benefits available through your health savings account while maintaining compliance with all IRS requirements for the 2013 tax year.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
