Do HSA contribution from employer (part of retirement medical benefits for a HDHP plan) need to be reported?

[SherKr]

I retired in 2023 (age 63) and have employer-sponsored Retiree medical insurance coverage. For 2024, I had an HDHP plan into which my employer made an HSA contribution of $700 (in Feb/March 2024) for 2024 plan year.  Since I was retired for all of 2024, I did not receive a W-2.  The contribution amount is reported on a 5498-SA from the bank administering the HSA.  (I did not take on HSA distributions during 2024.)

Do I need to report the 5498-SA amount as income for 2024?  If so, when usingTurboTax Premier, desktop version for Windows, where/how do I report it?

[BillM223]

First question, are you on Medicare? Any part at all?

If so, then the $700 that your employer gave to your HSA may be excess contributions. On what date did you go on Medicare, if you did?

HSA contributions are either excluded from Wages (which you don't have), or they are subtracted from your income on line 13, Schedule 2 (1040). However, you never declared this $700 as income, so it's not proper to deduct it from your income.

Since you did not receive a form about this $700 - I am not counting the 5498-SA for reasons I will give below - I would just ignore the $700 - no income, no deduction (but your HSA grows).

The form 5498-SA does not get entered into your tax return, rather it is for your own records.

NOTE: if you were on Medicare for all of 2024 or even almost all year, then the $700 is excess contributions, and we are going to have to do some work to get this right on your return. Come back to me and tell me about your Medicare coverage.

[SherKr]

No, I was not on Medicare at all in 2024. However, I live in California which taxes HSA contributions whereas Federal Govt does not.  (I have found the place in TurboTax where I can enter "Employer & payroll contributions not reported in Box 12 of your W-2")

[BillM223]

So you have 2 choices:

1. Report the $700 as Miscellaneous income (Wages and Income->Less Common Income->Other Reportable Income) and report it as HSA premiums paid by employer and $700; then enter the $700 as a personal contribution in the HSA interview on the screen that is titled "Let's Enter [name's] HSA contributions" (on the second line).

2. or just ignore it, that is, don't enter any income and don't enter any deduction (the $700).

The reason that #1 is the way it is, is so that the effect will be tax neutral on the 1040, but California can easily identify the HSA contributions and back them out. #2 means that you will have to manually adjust the California return to back out the $700 contribution. Since I don't typically advise manual adjustments, I prefer #1.

[SherKr]

Another option (similar to #1) I am considering is to report the $700 under Less Common Income->HSA section and answer the interview question "Did employer tell you about any other contributions" with a YES and enter the $700 under "Employer &payroll contributions not reported in Box 12 of W-2" instead of as a "personal contribution". That appears to also be tax-neutral on 1040 & allows California to identify the HSA contribution

Is there any advantage/disadvantage using this 3rd option ?

[BillM223 · Accepted solution]

Well, live and learn. I did not think that making the "contribution not on W-2" option would work for both the federal return AND the CA return, but, to my surprise, it does.

So, yes, please go ahead and report the $700 as an employer contribution not listed on the W-2.