If I received a credit from BC/BS (health insurance) from my premiums and I applied this to my HSA, do I have to report this as putting money into HSA?

[jalowry426]

Reason I am interested is since this is not from my taxable income.

[Mike9241]

the source of the money is irrelevant.  however, that BCBS policy has to be a high deductible plan. and yes you have to report all HSA contributions. if  you don't when the HSA trustee reports the contributions to the IRS and you don't,  you can expect a notice from the IRS.

you did not say if you were married because if so she would need to not have any independent insurance coverage or if she has it too would need to be a high deductible plan

[Opus 17 · Accepted solution]

If you paid the premiums with tax-free money (such as from an employer pre-tax payroll deduction) then the rebate is now taxable income to you.  If you paid the premiums yourself for private or marketplace insurance and took the schedule A itemized deduction for the premiums, then this may also be taxable income if it is a reimbursement of a previous deduction.

You must apply the "tax benefit rule".  For example, suppose you paid $5000 in premiums, and this was less 7.5% of your income so you did not actually get a deduction.  The rebate is not taxable since it is not a return of a previous deduction.  Or, suppose you paid $12,000 in premiums and 7.5% of your income was $11,000, so you got a $1000 deduction.  If the rebate was $1500, the taxable amount is only $1000 since that is the tax benefit you received.  If you received a premium tax credit, you will have to refigure the PTC for the year you paid the premiums to see if any part of the rebate is taxable.  Taxable recoveries are reported as "other less common income" at the bottom of the income page. 

Once you resolve the situation of whether the rebate is taxable or not, then the contribution is handled as a separate transaction according to its own rules.  Once the money is in your pocket or bank account, it mingles with all your other money and there is no difference where the HSA contribution came from. (This, of course, assumes you are eligible to make contributions to an HSA.)

[Opus 17]

---

@Mike9241 wrote:

you did not say if you were married because if so she would need to not have any independent insurance coverage or if she has it too would need to be a high deductible plan

---

This is not correct.  If spouse A has a family HDHP covering spouse A and spouse B, but spouse B is also covered by a non-qualifying plan from their employer, then spouse B is ineligible to contribute to an HSA, but spouse A is still eligible, as long as A is not covered under B's policy.  The fact that spouse B has disqualifying coverage does not, by itself, disallow contributions by spouse A. 

[jalowry426]

Okay, thank you. I do have a High-Deductible plan. I am married, filing jointly and my wife does not work outside the home. 

The premiums for my health insurance are paid for by my employer. So, pre-tax. Therefore, I assume I should receive a 1099 from BCBS? Or, do I just go ahead and report the amount of the check in other income?

[Opus 17]

---

@jalowry426 wrote:

Okay, thank you. I do have a High-Deductible plan. I am married, filing jointly and my wife does not work outside the home. 

The premiums for my health insurance are paid for by my employer. So, pre-tax. Therefore, I assume I should receive a 1099 from BCBS? Or, do I just go ahead and report the amount of the check in other income?

---

If your employer pays the premiums tax-free to you, then the rebate is taxable income since it was paid to you instead of the employer.   BC/BS might issue a 1099-MISC.  If they did, it must be mailed (or available online) by January 31, so I would wait to file a return until February.  If they do issue a 1099, make sure to answer the employment test questions with "no" -- this money is not from working, not like your regular job, not intended to earn a profit.  That will place the income on your return as "other income."  If they don't issue a 1099, you can manually place the income as "other income."  (The difference is, if BC/BS does issue a 1099 but you enter it directly as other income, the IRS may send an automated letter asking why you did not report the 1099.  You would answer that you did report it, but why deal with the hassle.)