I used funds from my HSA to cover medical expenses. I also paid for medical expenses out of pocket. IsTurboTax is subtracting the amount of HSA payments from the total OOP expenditures I paid and entered? Total medical was OOP + HSA payments.

[BMcCalpin · Accepted solution]

The way TurboTax works, it expects you to enter ALL expenses in Medical and Dental for Schedule A, then it will ask you for the amount of insurance reimbursements so it can subtract that, and then TurboTax will automatically subtract the HSA distributions.

This methodology requires that you enter amounts paid for with HSA distributions into Schedule A, so that the HSA distributions are not applied to some other expenses.

Unfortunately, this is not obvious to the user.

So, two things:

1. Be sure to enter the amount of your HSA distributions in Medical and Dental so that TurboTax's automatic subtraction of the HSA distributions from Schedule won't hurt your return.

2. Did you know that you can pay yourself back for those out-of-pocket expenses from your HSA now or in the future (when there is money there)?

There is no deadline for when you can reimburse yourself from the HSA for prior expenses, so long as the expenses were incurred while you were in the HSA. You just contact the HSA plan administrator and tell them that you need a distribution to you to repay yourself for out-of-pocket qualified medical expenses. They'll send you a check.

Why do this? Because most taxpayers don't get much benefit (if any) from trying to deduct medical expenses on Schedule A, because of the 10%/7.5% floor for expenses (and the fact that your Itemized Deductions need to be larger than your Standard Deduction anyway).

But every dollar that runs through your HSA is a pre-tax dollar, so you have saved money when paying medical expenses.

I understand you may already know this, but I wanted to make sure, since it would save you money.

[emeraldgreen]

Thanks Turbo TaxBillMc for the confirmation.  My initial results indicated what you described.

[plikakis01]

This is definitely not clear in Turbo Tax. As a taxpayer and an HSA holder, I understand that the expenses paid from an HSA are already pre-tax so I do not understand why TT makes you enter them and then subtracts them. I did not realize this and had to amend both my federal and state returns. Now I have to go back and check previous years to see what happened then. Very frustrating. Plus, spoke to two of your "tax experts" and neither of them had a clue as to how to handle an HSA. You need to hire more experienced people or stop calling them experts.