HSA Contribution

[Anonymous]

TT didn't ask the amount I contributed to my HSA.  As I understand, this contribution should lower my taxes owed. If I don't enter them amount, how does it change my taxable income?

[RaifH]

If you made your contribution through your paycheck, you have already received the deduction. This is because your HSA is funded using pre-tax dollars and will lower the amount in Box 1 of your W-2 by the amount that is in Box 12 Code W. 

If you made separate contributions out-of-pocket to your HSA, you may claim those on your tax return:

1. In the Federal section of your tax return, go to Deductions & Credits and scroll down to Medical and click Revisit/Start next to HSA, MSA Contributions.
2. If you made any withdrawals from your HSA, you should receive a 1099-SA and answer Yes to Did you use your HSA to pay for anything in 2021? Otherwise, select No.
3. Assuming you did not inherit this HSA, select No.
4. Under Let's enter your HSA contributions your employer amount should already be in there from the W-2. If you made additional contributions, enter that amount where it states Any contributions you personally made. 
5. Answer the questions on the next two screens, then make sure you answer the question related to your HDHP correctly on the next screen.

Once you enter this information, it should reduce your taxable income by the amount you contributed to your HSA. If you over-contributed to your HSA, the system will alert you and let you know the next steps you can take. 

[Anonymous]

I've done what you instructed and also talked with a TT expert. She said the deduction comes upon spending the funds (HSA dispersal), not upon contribution. I've looked at Boxes 1 and 3 on my W2, the amount differs  only by my 401K contribution. I contribute to the HSA only through payroll deduction. 

[RaifH]

You get two benefits from an HSA: It is funded with pre-tax dollars and you do not have to pay taxes on any earnings growth while the money is in the account as long as you use it for qualified expenses. 

Box 3 on your W-2 is your Wages for calculating Social Security and should be the same as Box 5 unless your income is over $142,800. This amount should not be reduced by contributions to a retirement account. It will be reduced by the amount of your HSA contributions. HSA contributions are not taxable income for your wages, social security, or Medicare. Box 1, on the other hand, should be reduced by both. If there is nothing else on your W-2, then Box 3 amount - Box 12 Code D (or a different code depending on which kind of retirement account) = Box 1 Wages.

In essence, by having all three types of wages lowered on your W-2, you have already realized one of the benefits of having an HSA. The other benefit is realized when you use the distribution on qualified expenses. 

[Mike9241]

I've done what you instructed and also talked with a TT expert. She said the deduction comes upon spending the funds (HSA dispersal), not upon contribution

your tax benefit comes from the contribution because it lowers your taxable wages.