My HSA is not Pre-taxed, how do I file for deductions?

[Darge82]

Hopefully I am explaining this right. My workplace provides us Healthinsurance for an HSA account, however no money is deducted from my paycheck for the HSA as "pre taxed",. What we have to do is, open an HSA account with our personal bank (I did this through my local Credit union) Then I take the "after tax" money from my check that gets deposited into my checking account and manually deposit $ into the HSA as needed to pay my medical bills. My employer does not contribute any $ to the HSA at all. There is no HSA deduction out of my check at all. 

I had a ton of medical bills this year. For about half the year I put $$ into the HSA from my checking account(after tax $) to pay these bills. This $$ was not pre taxed $$$.  The 1st half of the year, I was just paying the bills directly out of my checking account because I did not have the HSA bank account setup as I never needed it prior to this year.

Where and how do I deduct this using the webbased tax filing, especially if some of the bills were paid straight from my checking prior to having the HSA account setup to pay from? 

[rjs]

In the Search box in TurboTax, type "hsa" (without the quotes), then click the link that says "Jump to hsa" and go through the questions. You will come to a screen that asks about contributions that you made personally to your HSA. Entering the amount there is how you get the HSA deduction. TurboTax will fill out Form 8889 and you will see the deduction on Schedule 1 line 13.

You cannot claim an HSA deduction for medical bills that you paid before you opened the HSA account. If you have enough deductions to claim itemized deductions, you can include those earlier payments in your medical expenses. But you only get a deduction for medical expenses in excess of 7.5% of your Adjusted Gross Income (AGI). (Enter the full amount that you paid in TurboTax. TurboTax will subtract 7.5% of your AGI.) In addition, since medical expenses are an itemized deduction, they will not reduce your tax or increase your refund unless your total itemized deductions are more than your standard deduction.

[Critter-3]

The med expenses paid not with the HSA account go to the Sch A like normal if you itemize deductions.  Any paid thru the HSA are not deductible. 

The HSA is handled in 3 parts in the TT program :

https://ttlc.intuit.com/community/health-care/help/what-is-a-health-savings-account-hsa/00/25765

First the contribution:

https://ttlc.intuit.com/community/entering-importing/help/where-do-i-enter-my-hsa-contribution/00/26...

https://turbotax.intuit.com/tax-tips/health-care/what-is-the-irs-form-8889/L8hRNHx4o

Next the limitations screen to confirm you are eligible to make the contributions:

Until you complete the HSA portion of the TurboTax interview to establish your eligibility for an HSA contribution, TurboTax will treat the amount entered on the W-2 form as an excess HSA contribution.

https://ttlc.intuit.com/community/health-care/help/why-am-i-showing-an-excess-hsa-contribution/00/26...

And lastly any distribution:

https://ttlc.intuit.com/community/health-care/help/why-is-my-hsa-distribution-taxable/00/26609

[Darge82]

I appreciate the responses and this helped. 

So basically because there is no Pre Taxed money coming out of my check for my HSA, I will technically be losing $ since I cannot deduct it the same vs Pre Taxed as I am using taxed funds to pay? Am I understanding this correctly?

[Critter-3]

You are confused ... if you don't have the HSA contribution being taken from your paycheck thru the payroll system pre tax  then you get to take the adjustment on the tax return instead.  Read those directions again and then follow them thru the TT interview so indicate the HSA contribution you made. 

[Darge82]

Thanks for the fast reply. Yes I am confused. This statement threw me off. 

"But you only get a deduction for medical expenses in excess of 7.5% of your Adjusted Gross Income (AGI). (Enter the full amount that you paid in TurboTax. TurboTax will subtract 7.5% of your AGI.)"

My medical expenses are lower than 7.5% of my AGI so I was assuming I will not get any extra back in the refund. 

[Critter-3]

Ok  ... you are mixing up apples and oranges.  What you can deduct on the Sch A for medical expenses paid  are not the same thing as the  HSA  adjustment to income  you are entitled to on the form 1040 form 8889  and any expenses paid with funds from an HSA account cannot also be used on the Sch A. 

[Darge82]

I understand I cannot mix the 2 together.  Taxes are not my strong point so I am just a bit confused on the rest. Can you give me a simple answer on this scenario. 

Scenario A- Hypothetically, if I have money deducted from my payroll check Pre Taxed and deposited into my HSA (the most common way) Lets say we use the Max contribution allowed of $3650 for this scenario.

Scenario B-What I am currently dealing with. I had $3650 in total medical bills I paid from my payroll that has already been taxed. Half ($1325) I used prior to making my HSA account, the other $1325 I moved from my taxed funds from checking to my HSA and used that. 

Would there be any difference between this scenario where one would have been better than the other. For example, is using my taxed funds costing me more $$$ vs if it was done with the Pre Taxed way or does it generally even out in the end after filing and how it affects my refund?

[Critter-3]

Ok ... the answer I gave earlier  was to a different question. 

Scenario A- Hypothetically, if I have money deducted from my payroll check Pre Taxed and deposited into my HSA (the most common way) Lets say we use the Max contribution allowed of $3650 for this scenario.  You got the tax benefit when you  put the money in the HSA thru the payroll system  because you did not pay taxes on this money.

Scenario B-What I am currently dealing with. I had $3650 in total medical bills I paid from my payroll that has already been taxed. Half ($1325) I used prior to making my HSA account, the other $1325 I moved from my taxed funds from checking to my HSA and used that.   OK ... so you paid $3650 in bills ... half using the funds in an exhisting account  HSA accoount  and half with out of pocket money so that 1/2 can be used on the Sch A  IF  you can itemize deductions but since the expenses need to be more than 7.5% of your income to be deductible you may not be able to use the deduction.   

For the payment from the HSA you should get a form 1099-SA that must be entered on the return ... see my prior instructions. 

[rjs]

The apples and oranges that you are mixing up are two different kinds of deductions.

The HSA deduction is a deduction for money that you put IN to the HSA. It has nothing to do with medical expenses that you pay from the HSA or from anywhere else. Technically the HSA deduction is an "adjustment to income." You will see that title at the top of page 2 of Schedule 1. An adjustment is also sometimes called an above-the-line deduction.

When you take money out of the HSA and use it to pay qualified medical expenses, the money you take out is simply not included in your income, so you don't pay tax on it. But it's not a deduction of any kind. It's just not added to your income.

The deduction for medical expenses is an itemized deduction. It's for medical expenses that you pay (that are not covered or reimbursed by insurance). But you don't get to deduct the full amount. 7.5% of your AGI is subtracted from your total unreimbursed medical expenses, and only what's left, if anything, is deducted from your income.

An itemized deduction does not reduce your taxable income unless your total itemized deductions are more than your standard deduction. But an adjustment, or above-the-line deduction, always reduces your income.

[Darge82]

I am understanding what you both are saying on both scenarios. I appreciate the responses. But in simple terms, am I losing $$ because I am not putting Pre Taxed money into the HSA and putting money I have already been taxed on into? Or does it not matter as, if filed properly (from how you have described) it will even out in the end?

[rjs]

It doesn't matter. You come out the same. You are not losing money.

Either way, money that goes into the HSA is not taxed.

If it's pre-tax money taken out of your pay, it's not taxed, but you don't get a deduction for it because it's already not taxed.

If it's after-tax money, you get a deduction for it on your tax return, so you don't pay tax on it. You are calling it "already taxed," but it's not really already taxed. It was included in the taxable income on your W-2, but the deduction on your tax return takes it out of your taxable income, so in the end you are not paying tax on it.