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TurboTax becomes more inscrutable every year.

I was looking for where to report my HSA contribution, then realized it already came in on my W2. I have a $6000 line 12, code W (Employer contributions to HSA). These are supposed to be pre-tax contributions, so aren't taxed. So if I zero this out, nothing should change. But if I zero it out, my taxes go down. And then if I put it back to 6000, my taxes go back up.

If I instead zero out my line 12, Code D (Deferrals to 401k) my tax due does not change (as expected).

Is TurboTax completely broken? I checked and various things said HSA contributions are not subject to AMT limitations (and I don't know if I'm subject to AMT, anyway).

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    "Is TurboTax completely broken?" Unlikely in the extreme.
    – RonJohn
    Jan 30, 2020 at 3:21
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    You might be missing the part where declare that you have an High-deductible health care plan for all year. So for now TT thinks you just grabbed that money avoiding its taxes.
    – Aganju
    Jan 30, 2020 at 3:55
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    I don't remember the details, but there are two or three parts of the interview related to HSAs that are linked: how much is taken out of your paycheck, how much is deposited, and how much is withdrawn. My guess is that you "zero'd out" one and did not change the others, making one or both of the others taxable. Do a Federal Review and see if anything stands out.
    – D Stanley
    Jan 30, 2020 at 13:49
  • Is it both federal and state taxes that increase, or maybe just state? I think there's still a couple states that don't deduct HSA contributions, so any contributions are taxed as income (Looks like just New Jersey and California for 2019, though).
    – PGnome
    Jan 31, 2020 at 0:06

1 Answer 1

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TurboTax is considering these contributions unqualified for one reason or another. Go through the questions for HSAs in your tax deductions. TurboTax must validate that you meet all the specific requirements that allow you to have contributions to an HSA, otherwise you will pay an excise tax for excess/unqualified contributions.

The requirements include:

  • Coverage only under a HDHP for medical coverage, with limited exceptions.
  • Not enrolled in Medicare or Tricare.
  • Not a dependent on someone else's return
  • To be able to deduct your full $6000, your HDHP must cover dependents where the limit is $7000. If your insurance only covered yourself, your limit is $3500 and any excess will be subject to the excise tax.

IRS Publication: https://www.irs.gov/publications/p969

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  • This was exactly correct. Thanks.
    – Marvin
    Jan 31, 2020 at 1:06
  • 2019 'family' limit is $7000 (and if married applies to both spouses combined). Note the 2019 version of p969 hasn't been posted (or published) yet, although the changes should be minor. If you did overcontribute, you can avoid the penalty by withdrawing the excess, plus attributable earnings, by the (extended) filing deadline, and reporting them as not excluded or deducted (thus subject to normal tax, only).
    – dave_thompson_085
    Jan 31, 2020 at 8:07
  • @dave_thompson_085 I was originally referring to the amount the asker was claiming, not the actual limit. I've edited to clarify. Also, the linked publication does include the 2019 changes even though the title still says 2018.
    – LunarGuardian
    Jan 31, 2020 at 16:18

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