NJ Medical Worksheet is getting HSA amount instead of actual expenses

[nswartz99]

I had more distributions from my HSA for 2025 than expenses. I was taking money out for prior year expenses.

The NJ Medical worksheet is taking the amount from line 13b of the Federal Medical worksheet (total of all HSA distributions) instead of line 12 minus line 13a (Total medical expenses minus insurance reimbursements)

I can manually override this, but TT should not be using the HSA distributions for the NJ medical worksheet. NJ does not recognize HSA deductions or distributions.

[BillM223]

HSA distributions are made for qualified medical expenses (usually, although they could be marked differently).

Yes, NJ does not recognize the deductibility of contributions to an HSA.

On the federal return, you don't normally enter medical expenses that were reimbursed by HSA distributions, so your NJ return can't use the federal entries as a start for medical expenses. However, since all marked HSA distributions are for medical expenses, using the distribution amount is a good place to start for NJ.

Did you enter one or more 1099-SA(s) on your federal return (I am guessing you did)? Were all the 1099-SA distributions for qualified medical expenses? If so, then I would expect the NJ return to start with the HSA distributions, since they are de facto medical expense payments.

[nswartz99]

The only reason I am filling out the federal medial worksheet is to detail the various medical expenses for the NJ filing. There is no NJ detailed form. Even if I pay for expenses from the HSA and do not exceed 7.5% expenses for SchA, I still think TT should have a line that indicates the total expenses minus the insurance reimbursement and flow that to the NJ medical worksheet. It can still indicate the excess medical expenses that were not HSA covered that flows to SCH A.

[BillM223]

I have a test that has

* 20,000 in prescriptions

* 4,000 in insurance reimbursements

* 2,000 in HSA distributions (code '1')

federal Medical Worksheet

* 20,000 total medical and dental expenses

* less 4,000 insurance reimbursements

* less 2,000 HSA distributions

* 14,000 total deductible medical and dental expenses

This 14,000 goes to line 1 of Schedule A

New Jersey

Med Exp Wks

* 16,000 - total nonreimbursed federal medical expenses (lines 1a and 1c)

*  2,605 -  line 29 (NJ gross income) times 2%

* 13,395 - Medical expenses deduction (lines 3 and 6)

If you are saying that there is not a line on the federal return that shows total medical expenses less insurance reimbursements (16,000 in this case), there isn't. The 16,000 on the beginning of the NJ worksheet is Schedule A line 1 expenses less the HSA distributions. But it should be obvious when you look at the federal Medical Worksheet on lines 12, 13, and 14, which are

L12   20,000 <= total expenses

L13a 4,000   <= less insurance reimbursements

L13b 2,000   <= less HSA distributions

L14  14,000  <= net expenses carried to Line 1 of Schedule A

Still, I hope it is clear where everything is coming from.