Instructions for Form 8889 Checklist — 2018 Tax Year
Form 8889 reports health savings account contributions, distributions, and account status for
the 2018 tax year. You must file this form if you made HSA contributions, received distributions, or acquired an interest in an HSA during 2018.
Eligibility and High-Deductible Health Plan Requirements
You qualify as an eligible individual if you maintain coverage under a high-deductible health plan and have no other health coverage except permitted insurance. For 2018, an HDHP must meet minimum annual deductible requirements of $1,350 for self-only coverage or $2,700 for family coverage, provided the plan remains in effect for the entire year.
Your HDHP must also limit out-of-pocket maximum expenses to $6,650 for self-only coverage or
$13,300 for family coverage. You cannot contribute to an HSA if you enroll in Medicare Part A or
Medicare Part B, or if another taxpayer claims you as a dependent on their tax return.
Contribution Limits and the Last Month Rule
The HSA contribution limit for 2018 is $3,450 for self-only HDHP coverage or $6,900 for family coverage. Revenue Procedure 2018-27 restored the family limit after temporary adjustments and provided transition relief for affected taxpayers.
If you were age 55 or older on December 31, 2018, you may contribute an additional $1,000 as a catch-up contribution. The last month rule permits you to contribute the full annual amount if you maintained eligible status on December 1, 2018, but you must remain eligible through
December 31, 2019.
Reporting Contributions on Form 8889
Complete line 1 of Form 8889 by indicating whether you had self-only or family HDHP coverage during 2018. Report contributions you made directly to your HSA on line 2, including amounts contributed between January 1, 2019, and April 15, 2019, that you designate for the 2018 tax year.
Employer contributions appear in box 12 of Form W-2 with code W and must be reported on line
9 of Form 8889. Calculate your contribution limit on line 3 using the line 3 limitation chart and
the applicable worksheet if you changed coverage types or were not eligible for all twelve months of 2018.
Your total HSA deduction appears on line 13 and transfers to Schedule 1 (Form 1040), line 25, as an above-the-line deduction. This deduction reduces your adjusted gross income regardless of whether you itemize on your tax return.
Qualified Medical Expenses and Distribution Rules
Health savings accounts reimburse qualified medical expenses under Internal Revenue Code
Section 223(d), which generally includes costs that would qualify for the medical and dental expenses deduction. You receive Form 1099-SA from your HSA administrator showing total distributions in box 1, which you must report on line 14a of Form 8889.
Insurance premiums do not qualify as medical expenses unless they cover long-term care insurance, health care continuation coverage such as COBRA, coverage while receiving unemployment compensation, or Medicare premiums if you were age 65 or older. Distributions used for non-qualified expenses become taxable income and incur an additional 20% tax unless you meet an exception for death, disability, or reaching age 65.
Dependent Care and Healthcare Flexible Spending
Accounts
Dependent care, flexible spending accounts, and health savings accounts serve different purposes and are subject to specific coordination rules under federal tax law. A dependent care
FSA reimburses childcare and eldercare expenses under Code Section 125, while an HSA covers qualified medical expenses.
You may maintain both accounts simultaneously without affecting HSA eligibility. Healthcare flexible spending accounts may affect your ability to contribute to an HSA, depending on plan design, but dependent care flexible spending accounts do not.
Excess Contributions and Penalty Calculations
Excess contributions occur when total contributions exceed your annual limit based on coverage type and eligibility months. The Internal Revenue Service imposes a 6% excise tax on excess contributions, which you calculate and report on Form 5329.
You may withdraw excess contributions before your tax filing deadline, including extensions, to avoid the contribution penalty. The withdrawal must include any earnings on the excess amount, which you report as income in the year of withdrawal.
Additional Tax on Non-Qualified Distributions
Calculate the additional 20% tax on non-qualified distributions using Form 8889, Part II, line
17b. Report this amount on Schedule 4 (Form 1040), line 62, by checking box "c" and entering "HSA" with the dollar amount.
The additional tax does not apply if you received distributions after turning age 65, becoming disabled, or upon the death of the account beneficiary. Reconcile all distributions shown on
Form 1099-SA with your qualified medical expense documentation before filing your tax return.
Filing Requirements and Form Assembly
Attach Form 8889 to your 2018 Form 1040 or Form 1040NR when you file your tax return.
Include the line 3 limitation chart and worksheet if you calculated a prorated contribution limit based on partial-year eligibility. Attach any written explanations if the amounts reported on
Form 1099-SA differ from figures corrected by the HSA custodian. The Internal Revenue
Service requires proper documentation to verify all contributions and distributions reported on your HSA tax forms.
The 2018 tax year marks the final year for enforcement of the Affordable Care Act shared responsibility payment, as the tax reform law eliminated the individual mandate penalty beginning with the 2019 tax year. Form 8889 and Form 8965 address separate tax provisions without coordination requirements between HSA distributions and individual mandate calculations.
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