How does TurboTax deal with "self" funding of an HSA ?

Forum|Forum|2 years ago
June 27, 2024
2 replies
33 views

If funding with "personal" money, the money is already taxed(after-tax) and therefore people will not get the same tax benefits from pre-tax contributions(For example : From an employer through payroll deductions).

Thoughts ?

TurboTax Basic Windows

NCperson

Level 15

if you make a direct contribution to an HSA (called an 'employee' contribution), you will enter an adjustment to income using the 1099 SA form you receive to document the contribution. - because, you are correct, you are contribution are after tax money.

it is better to have the money withdrawn from your paycheck (a "employer' contribution) because it is deducted from your paycheck PRIOR TO social security and Medicare taxes.)

so you never pay SS and Medicare taxes on contributions via the paycheck, but of course, you have already done so if you make a direct / employee contribution

trapezewdcAuthor

Level 5

Thanks

Opus 17

Level 15

If you participate in an employer sponsored HSA via salary reduction agreement, your employer puts money in the account for you on a pre-tax basis. You save federal and state income tax, and also 7.65% social security and medicare tax. If you deposit money directly in an HSA from your after-tax dollars, you claim a tax deduction when you file your return, which reduces your state and federal income tax by the same amount as if the money had been deducted from your paychecks pre-tax. You don't get the additional savings in social security and medicare tax. So employer participation is better, if you have that option, but a self HSA is still a really good deal.