I wonder why my HSA distribution for medical expense decrease my tax refund. I select Yes - all paid for medical expense in turbotax. It make the refund less. no sense.

Forum|Forum|3 years ago
April 17, 2023
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DawnC

Level 15

Are you sure you have a refund and not a tax due? Finish the entire section and review you tax return. You have to answer follow-up questions about HDHP coverage.

In Part ll of Form 8889, look on Line 16 - is there an amount? If not, your distributions are not being taxed.

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heon228Author

Level 2

Form 8889 shows

line 15 - entire amount of my distribution is qualified medical expense

line 16 - taxable HSA distributions = zero.

However, when I delete my distribution or change that amount to zero, turbotax give more money in my return. It is after saving all my section. So, it looks to me implicitly saying my distribution decrease my refund. NO make sense....

BillM223

Level 15

Are you also filing a Schedule A?

TurboTax automatically transfers the distribution amount to Schedule A as a reimbursement (like an insurance reimbursement). For most taxpayers, this makes no difference, but this will reduce the amount of medical expenses that you can deduct on Schedule A - this could explain what you are seeing.

If this is the case, the way to fix this is to go back into the Schedule A interview and add in the Miscellaneous section at the end wit a medical expense with the description of "HSA adjustment" and the dollar amount equal to the distribution amount. Then, if this is the issue, your refund will go back up to what it was.

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