Why HSA taxable?

[twlaabs]

Initially W2 box 12 code W only included the employer portion of my HSA contribution.  When this was corrected to include both employee and employer amounts my federal tax liability went up. Why is my HSA contribution taxable? Shouldn't there be no change in tax liability if only code W was increased?

[Critter · Accepted solution]

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

First the contribution:

https://ttlc.intuit.com/replies/4557768

https://ttlc.intuit.com/replies/4785646

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/replies/5190989

https://ttlc.intuit.com/replies/4788059

And lastly any distribution:

https://ttlc.intuit.com/replies/4787864

[Critter]

In most cases, your HSA contribution has already been reported in Box 12 of your W-2 with code W: Employer Contributions to Health Savings Account.

Despite the misleading name, code W reports both your and your employer's contribution. (A better name would be "Contributions to Health Savings Account" but we have no say in the matter.)

So if you put $1,500 in your HSA during 2017, and your employer matched your contribution, your W-2's Box 12 should have the amount of $3,000 with a code W.

Now, if you made HSA contributions not reported on your W-2 (this is uncommon), we'll ask about that when you step through the Medical section. Look for the questions Were HSA contributions made in 2017? or Do you need to make any adjustments to your HSA contribution amount? Answer Yes and we'll open a screen where you can enter that information.

Related Information:

·         How do I fill out the Box 12 information from my W-2?

·         Can I deduct medical costs paid through my HSA or MSA?