Updated August 3, 2026. Quick answer: an excess HSA contribution carries a 6% excise tax — for each year it stays in the account. It is not a one-off. You escape it by withdrawing the excess plus the earnings on it by the due date of that year’s return, including extensions.
The excise, and why it repeats
[IRC 4973(a)/(g):] there is imposed for each taxable year a tax in an amount equal to 6 percent of the amount of the excess contributions to such individual’s accounts or annuities (determined as of the close of the taxable year). The amount of such tax for any taxable year shall not exceed 6 percent of the value of the account or annuity (determined as of the close of the taxable year). … (g) Excess contributions to health savings accounts For purposes of this section, in the case of health savings accounts (within the meaning of section 223(d)), the term “excess contributions” means the sum of— (1) the aggregate amount contributed for the taxable year to the accounts … which is…
— IRC 26 U.S.C. 4973(a), 4973(g); IRC 223(f)(3)(A)(ii); IRS Publication 969 (2025 rev.), “Excess contributions”; IRS Notice 2004-50, Q&A-34
Read the mechanism rather than just the rate. The excess is measured as of the close of the taxable year, and the definition carries the prior year’s excess forward into the current year’s calculation. So an excess that is never corrected is taxed at 6% again and again, on a balance that keeps qualifying.
This is the part people underestimate. A modest over-contribution ignored for a decade is not a small one-time penalty; it is a recurring charge on the same money.
The escape, and its deadline
Withdraw the excess contribution and the net income attributable to it by the due date of your return for the year the contributions were made, including extensions. Two details decide whether it works:
- The earnings must come out too. The statute requires the distribution to be accompanied by the net income attributable to the excess. Withdrawing the bare contribution does not complete the correction.
- The earnings are taxable, reported as other income for the year you take them out. That is the cost of the fix, and it is far smaller than a repeating 6%.
Tell the custodian this is a return of excess contribution, not an ordinary distribution. They calculate the attributable earnings and code it correctly — a normal withdrawal reported the usual way does not fix the problem and can create a second one.
How the excess usually happens
- Losing eligibility mid-year — enrolling in Medicare is the classic one, and the six-month lookback can make contributions retroactively excess.
- Changing from family to self-only coverage without changing the payroll contribution.
- Two accounts, one limit. Opening a second HSA does not create a second limit — a common side effect of fixing the catch-up problem.
- An employer contribution the employee did not count toward the limit.
If the deadline has passed
The 6% applies for that year, and the practical route is to stop contributing and let the following year’s unused limit absorb the excess — the excise stops once the excess no longer exists at year end. This is worth getting right with a tax preparer, because the carryforward arithmetic is where people compound the original error.
Related: how much to put in · the Medicare lookback.
General information drawn from the Internal Revenue Code, IRS publications and IRS notices, not legal, tax or financial advice. HSA contribution limits and catch-up amounts are adjusted annually and are deliberately not reproduced here – use the current IRS figures. Eligibility depends on your health plan and your Medicare status, both of which change. We sell no accounts and receive nothing from any HSA provider.