1099 SA medical savings accounts - why is the software increasing my tax liability when a distribution from my HSA account was used 100% for qualified medical expense?

Using TT 2018 Deluxe.  I am in the 12% marginal tax bracket.  I am retired with Medicare A, B and D plus Medicare supplemental plans for both my spouse and me.  Total deductions from income are higher than the standard deduction for married filing jointly and over 65, so we itemize on Schedule A.  I had already inputted my deductible medical expenses for 2018.  When the 1099 SA arrived, I inputted the distribution amount and noted that all had been spent for qualified medical expenses. The software took my supposedly non-taxable distribution from my HSA, multiplied it by 12% and thus increased my tax liability.  Example - if the distribution was for $1000 for a surgical procedure, the software increased my tax liability by $120.  The only way I can get back to the original tax liability is to now increase my medical expenses by the amount shown in the HSA distribution. That makes no sense at all.

Deductions & credits

Come on Intuit, FIX THIS BUG! !  This is terrible quality

Deductions & credits

When you enter Schedule A, TurboTax expects you to enter all of your medical expenses, reimbursed or not. At the end of the Medical Expenses interview, you will be asked how much insurance reimbursement you received and this amount will be removed from your expenses. If you have an HSA, I believe that you now see a screen (it wasn't there in years past) that asks you to make sure that you have added any expenses that were paid by your HSA, because the amount of your HSA distributions will also be subtracted automatically from your Medical Expenses.

This is not obvious to the taxpayer, so many do not enter expenses that they know were reimbursed.

The easy way to fix this is to add up all the medical expenses that were covered by HSA distributions (probably 100%) and make a single entry in the Medical Expenses section under Other or Miscellaneous: enter "HSA medical expense offset" and the dollar amount.

This way, there will be expenses to offset the distributions against, and your return will be correct.

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Deductions & credits

Thanks!  That's what I did.  But, COME ON INTUIT, FIX THIS BUG !  SHOULDN'T HAPPEN !
atcsernak
New Member

Deductions & credits

The software has a bug. I have 2018 deluxe also and entered information through the forms not by the interview. The 1099-SA has a distribution code:1 - with is normal distribution. This should transfer the qualified amount to 8889-T but it does not. Need to contact TurboTax directly and hope they will fix this.