Aren't HSA contributions pretax? Why does my refund drop by $1500 when I input $4000 on form W-2 box 12 code W "Employer contributions to Health Savings Account"?

Forum|Forum|7 years ago
June 5, 2019
2 replies
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This is my first year using an HSA. I contributed $3000 and my employer contributed $1000. How is it that my federal refund could be reduced in any way by using an HSA?

TurboTax Deluxe Windows

HollyP

Employee Tax Expert

Yes, this is because entering your HSA is a two-step process in TurboTax, so you just have to keep going. Since you are not done entering all your information, this change in the refund is correct. Remember that refund number is just a work in progress until you're actually done entering in all your information.

HSA information is entered in 2 sections of TurboTax. First in Wages & Income as a W-2, 12 code W. But then you have to also enter it in the Deduction & Credits section under HSA, MSA Contributions too. So long as you meet all the requirements such as only using the HSA distributions for medical purposes and having a high-deductible health plan (HDHP) then your contributions on the W-2, box 12, Code W will not be taxed. See the following TurboTax FAQ for more info. https://ttlc.intuit.com/replies/4787864

To jump to the HSA, MSA Contribution section take these steps:

Sign in to TurboTax Online
Click take me to my return
Click Federal Taxes
Click Deductions & Credits
Look for the Medical, HSA, MSA Contribution section and follow the on-screen instructions

Tax Tip: If you took any distributions from your HSA then you will receive a 1099-SA. See the following TurboTax FAQ for more info. https://ttlc.intuit.com/replies/3301402

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x0bkhawk

Level 2

I found there is more to this answer. I was taxed on the W-2 Box 12 HSA contributions till I did "all" of the following steps:

1) Enter an amount on the Wages & Income W2 Box 12 (getting taxed for the full amount of your HSA contribution)

2) Then under deductions & credits: Enter your 1099-SA and claim money spent in box 1 was only for medical expenses. (This won't change that you've been taxed for your contribution)

2) Continue following turbo tax deductions & credits till it asks about your High Deductible Health Plan (HDHP). For the HSA contribution to be tax free, you also have to be enrolled in an HDHP. When you answer "yes" to being enrolled in an HDHP the taxed amount on Box 12 will be removed.

Hope that helps those still struggling with this issue as I was.

Bryan

smueller71

Level 2

Thanks Bryan. Your message was spot on. It dumped about $1700 back into my refund.

msmith627

Level 2

For the last several years Intuit has demanded that I withdraw several thousand dollars from my HSA account to avoid being taxed. The first time I foolishly followed there instructions even though I only contribute 3250 for that tax year. They are counting my HSA balance, accumulated over the last 10 or so years as taxable income. I did use my HSA to purchase an emergency medical kit and eyeglasses but these are legitimate medical expenses that came to less than 1000 dollars. So why is Intuit telling me that I need to withdraw over 5 grand to avoid being taxed? I'm trying to accumulate enough money to have expensive dental surgery which my company's lousy health care plan barely contributes. No one I know pays taxes on their HSA and I've asked almost everyone. I have colleagues with more than 30 grand in their accounts and they don't pay taxes on it. So why is Intuit insisting that my balance be less than 12 grand? It doesn't make sense.