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Ah, tax season. I have an issue. My medical deductible is $5000 USD a year. My employer contributes $5200 to an HSA account, and it shows up on my W-2 box 12. The main question is, does this amount go into line 21 (other income) on 1040?

If it does, and I fill out out form 8889, the maximum contribution for family income is $6750. Later, I am instructed to subtract the employer contributions ($5200), for a difference of $1550, which is used on line 25 (HSA deduction) of 1040. Basically that would add $3650 to my taxable income, which is not my understanding of how HSAs work.

Cheers

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  • Did you contribute the $1550 through your employer via payroll deduction, or did you send this in to your HSA on your own with after-tax money?
    – Ben Miller
    Commented Apr 17, 2017 at 3:43
  • I contributed 0 to the HSA. The company contributed 5200. The $1550 figure I got was from deducting $5200 from $6750.
    – kiss-o-matic
    Commented Apr 17, 2017 at 15:52

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Generally, no, you do not include the amount your employer contributed to your HSA as "other income" on line 21. Because it is not added to your income (not included on Box 1 of your W-2 or on line 21), you do not deduct it on line 25, either.

In the Form 1040 instructions for Line 21, you'll see several references to the HSA and different circumstances where you need to add income here related to the HSA. However, your employer's contributions to your HSA are not taxable as long as you were an eligible individual for the HSA and did not exceed the contribution limits.

Form 8889 is required for anyone who contributed to or withdrew (received distributions) from an HSA. Because your employer made contributions and you used your HSA debit card, you will need to file Form 8889. You should have received a 1099-SA form that showed the amount you took out of your HSA.

Based on your comment above, I believe that you are filling out your Form 8889 Part I incorrectly. Line 2 should only include HSA contributions that you made to your HSA directly, and should not include any amount that your employer put in or any that you contributed through your paycheck. Based on your comment, Line 2 should be $0.

Line 3 will be $6750, and Line 9 is where you enter your $5200 that your employer contributed. Line 12 will have the $1550 number you had, but when you get down to Line 13, the smaller of Line 2 or Line 12 will be $0, meaning that you have no deduction to put on your Form 1040 Line 25.

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  • Fantastic, thank you. So, if I'm not to deduct it on line 25 either, does that mean I do not need to fill out form 8889 at all? It seemed like one of the values there (sorry, I dont't have the form in front of me) would end up as a deduction on line 25. I did use the HSA debit card to pay for some qualified medical expenses. Note: I used Credit Karma's system this year. This the first year they are using it, and I have used their site quite a bit, so figured I'd give it a shot. Their software originally populated line 21. Hence, the confusion.
    – kiss-o-matic
    Commented Apr 17, 2017 at 15:55
  • @kiss-o-matic Based on your comments, it sounds like you are not filling out your form 8889 correctly. I've added more information to my answer. If you need more information, let us know.
    – Ben Miller
    Commented Apr 17, 2017 at 20:47
  • re: edits -- okay, this is making sense now. Thanks so much. I need to find the 1099-SA form. I think I have it in my desk at home, actually.
    – kiss-o-matic
    Commented Apr 17, 2017 at 22:40

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