If I contributed money to an HSA (my employer contributed nothing), turbo tax lists the total amount contributed under "Tax free employer contributions"?

[lrubin28]

I'm confused because they didn't contribute anything, but it shows up as a 'tax free employer contribution'. Does that sound right?  I'm I getting the benefit of the HSA contribution somewhere, or is it just from reduced taxes taken from my weekly paycheck? Thanks in advance.

[BillM223]

The IRS calls any contribution that comes from your employer to be the "employer contribution", even of the actual source was your payroll deduction.

They do this because the employer contribution (the amount listed in box 12 on the W-2 with a code of W) is treated differently than a direct contribution (one not made through your employer).

On your W-2 the code W amount is removed from Wages in boxes 1, 3, and 5 before the W-2 is printed. This means that not only do you not pay federal income tax on the HSA contributions, you don't pay Social Security or Medicare taxes either. There is no "deduction" on your return because those contributions were never in your income in the first place.

If you make a direct contribution to your HSA, then you get to deduct that amount on line 12 of Schedule 1 (1040), but that reduces only your federal income tax, not the SS or Medicare taxes.

So it's a counter-intuitive use of the word, but TurboTax has to follow the IRS's lead.