dmertz
Level 15

Retirement tax questions

The deduction for an HSA contribution has nothing to do with wages or compensation.  As I said, the deduction for an HSA contribution simply reduces AGI, but not below zero, which reduces taxable income, but not below zero (except in the case where your minimum taxable income is further limited by alternative minimum tax; check for a Form 6251 in your tax return).  Make sure that you've answered all of TurboTax's questions in the HSA section that are necessary for TurboTax to properly prepare Form 8889.

 

A reduction in your taxable income could be pulling your income that is taxed at long-term capital gains rates into the 0% capital gains tax bracket.  Once all of your taxable income is taxed at the 0% long-term capital gains rate, further reductions in taxable income will not reduce your income tax liability because it'a already zero.

 

Be aware that changes to your AGI can have side effects in other areas of your tax return.