HSA - Deductions & Credits

[kristenl2784]

Hello,

Last year when I filled my taxes I received a tax break of 3400$ for my HSA, but for some reason this year it shows 0$ for a tax break.  Why would this happen? 

[HelenC12]

Please clarify. 

• Did you make the HSA contribution though your employer with W-2 deductions?
• Did you make the HSA contribution directly to your financial institution?

[kristenl2784]

Every year its through my employer, they contribute, and they pull what ever amount I would like out of my pay and put it into my HSA account. 

[kristenl2784]

Shows 2021 as 3543$, but this year as 0$. This is under the deductions and credit

[JulieS]

When you contribute to your Health Savings Account (HSA) through work, your employer excludes the amount from your taxable wages in box 1 and shows the contribution in box 12, code W.

When you file the return, you can't deduct it again. This was not clear a few years ago, but the IRS has clarified that contributions made at work were not eligible for an HSA deduction on Form 1040. Click here for more information. 

[kristenl2784]

Whats strange is that my sister has the same HSA as I do, works at the same company, and she ended up with a tax break. 

[NCperson]

@kristenl2784 - is this the confusion?

When you have an HSA contribution  through your employer, you get the tax break because your wages in Box 1 are reduced by the amount of the HSA contributions, which are listed in Box 12 (code W).  These are called EMPLOYER contributions, even though it was your money reduced from your paycheck!

But then along the way, Turbo Tax asks if you made any contributions to your HSA.  These are totally different from what came out of your paycheck! they are called 'EMPLOYEE" contributions.  Beyond your paycheck, you can always make additional contributions to the HSA (up to the annual limit) by simply sending in a payment! If you did not contribute beyond your paycheck, then this amount should be zero!  If you inadvertantly enter the amount from the W-2/ Box 12, you end up with TWICE the benefit and that would be incorrect!   

Does that solve the confusion? 

[BillM223]

To be clear, YOU GOT A TAX BREAK, but as Julie point out, yours was in disguise as a reduction in Wages in boxes 1, 3, and 5 on your W-2. You can't exclude an amount AND take a deduction as the same time - that's double dipping.

As for your sister, we don't know how she entered her information.

If you make a contribution through your employer, the amount appear on your W-2 in box 12 with a code of W.

In the HSA interview, there is a screen labelled, "Let's enter [name]'s HSA contributions". Your tax benefit from your W-2 will be on the first line. The second line is there in case you made any direct HSA contributions (i.e., not through your employer). You must NOT enter any part of what is on line 1 in line 2 - that's double dipping (and often leads to false excess contributions error messages).

So what did your sister enter and where?