Can I claim the HSA deduction on a non-resident North Carolina tax return?

[Kris-K]

In TurboTax, my HSA contribution reduces my federal taxable income.  The non-resident NC tax return picks up income from the federal return, but doesn't pick up the HSA deduction. Can I claim the HSA contribution against my NC income?

[Mike9241]

not likely on non-resident return. 

[Kris-K]

thank you for your help 🙂

[TomD8]

@Kris-K --

Are you referring to direct (not through your employer) contributions?  In 2021, direct HSA contributions can be found on line 13 of Schedule 1 (1040). This deduction reduces your Adjusted Gross Income.  Since the North Carolina return starts with your federal AGI, the HSA deduction flows through automatically to the state return.

(Contributions through payroll would appear in Box 12 of your W-2 with Code W.)

[Mike9241]

since the HSA deduction is included through the federal return the OP question becomes do they need to add back the HSA contribution since they are filing a non-resident return.  it would seem that an add back is not required.

[Kris-K]

Thank you TomD8!  You are correct.  I was looking at Schedule PN, and the deduction is not included there.  However, that's beneficial, as the exclusion causes the denominator to be larger and results in a smaller taxable %.  I appreciate your help!

[Kris-K]

@Mike9241 Thank you!  That is indeed the question & I agree I found nothing to indicate a NR must addback the HSA deduction to AGI.  I appreciate your help!

[TomD8 · Accepted solution]

Just to clarify: with regard to the HSA deduction, it makes no difference whether the taxpayer files as a resident or non-resident of NC.  That's because both types of return start with the federal AGI, which already includes the deduction.

[Kris-K]

@TomD8 You are absolutely correct ~ thank you for all your help!