High deductible health plan state deduction

[prometheus]

My state (Georgia) allows for you to deduct your HDHP from your state taxes. From what I read, it sounds like you CAN'T do this, if it is taken out of your overall federal income. So, my HDHP is paid BEFORE taxes, therefore that means I can NOT deduct it from my state? Just want to clear this up. THanks

[kesldwyer]

Does using an HDHP from the government Healthcare system (Obamacare) qualify for these Georgia deductions? Also, these "contributions" include premiums, medical, & prescription expenses, right?

[DanielV01]

I apologize I didn't see your comment.  The Obamacare Health Insurance is a perfect example of what IS deductible, because you do have to pay these out-of-pocket.  If you receive subsidies (Premium Tax Credit), you reduce the amount you paid by additional PTC you get on your tax return or it increases if you have to pay back excess Premium Tax Credit you received.  This GA deduction is based on the payment of healthcare premiums only, since HSA contributions are already deducted from your Federal AGI.

[DanielV01 · Accepted solution]

You are correct.  I'd like to commend you on the excellent research you did on this, because the wording on the Georgia statute can sound a bit confusing.  Here is the important part quoted word-for-word:  

"20. An amount equal to 100 percent of the premium paid by the taxpayer during the taxable year for high deductible health plans as defined by Section 223 of the Internal Revenue Code. The amount may only be deducted to the extent the deduction has not been included in federal adjusted income and the expenses have not been provided from a health reimbursement arrangement and have not been included in itemized deductions." (Italics added)

The deduction is included in your Federal Adjusted Income if you paid for it with pre-tax dollars, because it has already reduced your taxable income.  In short, Georgia will not let you take two deductions for the monthly premiums you are paying for your health insurance.

[wxdude2]

Could you be more specific for folks who are self-employed? I had a high-deductible ObamaCare plan in 2016. On line 29 of form 1040 there is an amount equal to most of my paid premiums under "Self employed health insurance deduction." I also received a small premium tax credit (presumably for overpayment of health care premiums). May I also take the full deduction for High Deductible Health Plan Contributions on my Georgia tax return?

[DanielV01]

Yes, you are allowed the full deduction, minus the additional premium tax credit (considered as if it were a refund of premium).  However, it depends on the Georgia form how they calculate it.  In my state there is a similar credit, and for self-employed individuals, they add-back the self-employment healthcare premiums deduction and then re-deduct the full amount of the healthcare premiums paid.  This is because you can only claim on the Federal Return a deduction for the amount of self-employment income you have.  So, in my state, this add-back and re-deduct allows for the entire deduction to be claimed no matter what.  I have to believe Georgia does something similar; the point is that the idea behind the provision is to give the person paying out-of-pocket the same benefit as the employee who gets a pre-tax deduction on their paycheck and sees the tax savings then.

[wxdude2]

Thank you, Daniel. This explanation helps a lot. It looks as if TurboTax calculates this for me on my Georgia return when I input the amount of premiums paid.

[DanielV01]

Your welcome.

[nimbette2]

what happens if I am not self-employed and not working at all,  but am paying for a high deductible health plan? Can I deduct that amount too? or should I set up an LLC so I can show I am self employed?

[DanielV01]

The real issue is whether or not your HDHP was paid for with pre-tax dollars.  If it was after tax, there is no need to set up an LLC to claim the deduction.  You just want to have documentation showing that is was paid for after-tax, and you are entitled to the deduction.

[djlafollette745]

How do you know if your high deductible health plans is pre-tax or after-tax

My employer automatically takes my insurance premiums out of my paycheck.

I see on my W2 box 12 the code of DD and the dollar amount.

This is printed on page 2 of the W2 "DD—Cost of employer-sponsored health coverage. The amount
reported with code DD is not taxable."

does that not taxable statement mean not to tax it because it has already been taxed?

Which should mean I can take the Georgia deduction.

Or does it mean not taxable because don't take because it is pre-taxed money and should not be taxed.

Which should mean i can not take the  Georgia deduction.

Thanks for your help.

[KeshaH]

Typically, if your HSA is funded through payroll deductions, it's pre-tax which means you wouldn't get a deduction. However, you can verify this with your employer to be sure.