Taxable Health Savings Account (HSA) Contributions in Wisconsin - How do I know what contribuions are taxable?

[IJustHaveAQuestion]

I am unsure what to put for "HSA Contributions taxable in Wisconsin" on the "Taxable Health Savings Account (HSA) Contributions" page. How do I determine what contributions are taxable in Wisconsin?

I have a HDHP. I made the maximum contributions in 2022. I don't believe my HDHP allows for telehealth services without regard to my deductible. As far as I can tell on my plan coverage and benefits website, any telehealth or remote care services would be like my normal benefits - deductible then 15% co-insurance after deductible. Neither my wife nor I have ever used any tele-health services.

Here is the full text on the Turbo Tax State Taxes screen:

"Per your federal tax return, current year contributions were made to one or more health savings accounts (HSA). if your high deductible health plan allows for telehealth or other remote care service payments, without regard to the annual deductable, you may be required to add back to Wisconsin income HSA contributions that were excluded from federal income".

Learn More text:

"Health Saving Account (HSA) Current Year Contributions taxable in Wisconsin

In order to make current year health savings account (HSA) contributions, you must be covered by a high deductible health plan. For 2022, federal law defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. Wisconsin follows this definition.

Beginning in April 2022, federal law expanded the definition of a high deductible health plan to allow for telehealth or other remote care services to be paid for prior to meeting the annual deductible amounts. Wisconsin did not conform to this expanded definition. Consequently, if your high deductible health plan allows for telehealth or other remote care services payments prior to meeting your deductible, you must add back to Wisconsin income the HSA contributions made after March 31, 2022 that were deducted from federal income.

The total amount of HSA contributions excluded from federal income can be found on Federal Form 8889, Health Savings Accounts (HSAs) lines 9 and 13. These amounts have automatically been transferred from your federal return."

Thank you.

[BillM223]

What Wisconsin did was to state that your health insurance policy fails to be an HDHP (as far as WI is concerned) if it allows reimbursement for telehealth visits. This was allowed on the federal level starting April 2022.

For this reason, you cannot deduct HSA contributions from Wisconsin taxable income after March 31, 2022 if your HDHP policy allows televisits as part of the health policy coverage.

So you have two things to do:

1. Find out if televisits are part of your HDHP. Get it in writing. It does not matter if you actually used that feature, only that it was available.

2. If the answer to #1 is that televisits are part of your current HDHP policy, figure out what HSA contributions were made in which months. For amounts on your W-2, you can proportionately figure it out by doing a ratio of the whole year divided by 9 months. For any contributions that you made directly to the HSA, go and find out what dates these contribution were made.

Then add the sum of these amounts to the question in TurboTax which asks for the amount of HSA contributions you have to add back to WI taxable income.

Make sense?

[IJustHaveAQuestion]

Makes sense. Thank you for the clear explanation. Can I ask where you found this information? I am looking on the Wisconsin DOR website and cannot seem to find an explanation of this. 

[BillM223 · Accepted solution]

I got the initial idea from the last quote that you gave, ""Health Saving Account (HSA) Current Year Contributions taxable in Wisconsin".

Now go look at the WI instructions for line 30 of Schedule I: "Wisconsin – A health plan is not treated as a high deductible health plan if it fails to have a deductible for telehealth or other remote care services. Therefore, contributions to a health savings account for a plan not treated as a high deductible health plan for Wisconsin purposes are included in federal adjusted gross income and no deduction from federal adjusted gross income is allowed."

Then go look at Section 223 of the IRC (this is the base code for HSAs): "(E)Safe harbor for absence of deductible for telehealth

In the case of plan years beginning on or before December 31, 2021, or in the case of months beginning after March 31, 2022, and before January 1, 2023, a plan shall not fail to be treated as a high deductible health plan by reason of failing to have a deductible for telehealth and other remote care services."

I have to admit that this all reads differently from what I said...the issue is how televisits are reimbursed. "Beginning in April 2022, federal law expanded the definition of a high deductible health plan to allow for telehealth or other remote care services to be paid for prior to meeting the annual deductible amounts." Wisconsin did not accept this change, so any health plan that allowed reimbursement of telehealth visit prior to meeting the deductible. That is, Wisconsin requires that reimbursement for telehealth to be applied to the deductible all year, and not separate.

So #1 above is change to: find out how televisits are reimbursed by your HSA all year. If it conforms to the Federal (i.e., changed in April through the end of he year), then it is not deductible in Wisconsin.

This may be a question for your HSA custodian. Look on their website, and if you can't find it, call, and ask to speak to a supervisor about how your HSA deals with the change to federal law in April, 2022 (you have the text above).

[IJustHaveAQuestion]

Thanks again. Very helpful.