This tax filing will be the first I've filed upon entering the workforce after graduating in May of 2016. My family is filing and including me as a dependent because I lived with them up till September 2016. My new employers contributions to my HSA are being taxed because of this.
Unfortunately, if someone else has included you as a dependent, then you are ineligible for HSA contribution. There is only one option for you to minimize the taxes due. You must contact your HSA bank and inform them that you are ineligible and are requesting an excess contribution withdrawal of all 2016 contributions. This will allow you to avoid a 6% penalty tax. The total contribution amount that will be returned to you will however be added to your taxable income.
I guess my actual question was if there was any way to avoid this while still being filed as someone else's dependent - I was told these contributions would be tax-free.
Unfortunately, if someone else has included you as a dependent, then you are ineligible for HSA contribution. There is only one option for you to minimize the taxes due. You must contact your HSA bank and inform them that you are ineligible and are requesting an excess contribution withdrawal of all 2016 contributions. This will allow you to avoid a 6% penalty tax. The total contribution amount that will be returned to you will however be added to your taxable income.