When I entered my hsa contributions it made my tax owed go up. Since HSA contributions are pre-tax, that seems wrong. Why do I have to pay tax on the HSA contributions?

[malcolmski]

When I entered my HSA contributions ($7,613.88) it made my tax owed go up by $2,589. Since HSA contributions are pre-tax, that seems wrong. Why do I have to pay tax on the HSA contributions? 

None of the answers to your questions address this. 

[meadow-paul]

The same thing happened to me.  I don't understand the details of why, but for some reason the form input filled out the underlying tax form wrong.  If you go to the form (8889-T) itself using the 'Forms' button, you will probably see in sections 1 and 3 that the boxes to indicate coverage under a HDHP (high deductible health plan) were not checked, thereby making your HSA contributions non-deductible.  I compared to my forms from last year. and made it look the same, because nothing has changed in my case.  That fixed it, and showed my whole contribution as deductible on line 13 (HSA deduction).   Hope this helps!

[TomYoung · Accepted solution]

"Why do I have to pay tax on the HSA contributions? "

You don't have to pay tax on your HSA contribution, and you won't pay taxes on your HSA contribution when you tell TurboTax that you're covered by a qualifying HDHP.

When you enter that information off your W-2 TurboTax doesn't know if you're covered or not.  Pending an answer to that question it kicks the deduction over to "Other income" (line 21 of the Form 1040) and your tax goes up.  Once you work through the HDHP/HSA questions over in the "Credits and Deductions" area TurboTax will reverse that entry and your taxes will go back down.

Tom Young

[malcolmski]

That's very helpful. Thanks Tom!

[bully4mu]

I answered the HSA/HPHP questions as I should (all HSA used for medical expenses and I had a HDHP all year), but my taxes did not go back down.  What is wrong?

[biggity007]

Thanks Tom.

[fwknowles]

Hi there, I'm experiencing the same issue. HSA contributions were the first item entered after W-2s. I was +$200 after entering income, but after entering HSA information and indicating that I had a HDHP, my bill was $-1400. Please assist. 

[MayaD]

HSA contributions made by you and your employer are in box 12 of your W-2 with the code W, make sure you didn't enter that amount again in the HSA section as this will incorrectly double your total contribution amount.

[fwknowles]

Hi there Maya, thanks for your response. I did not enter it again but when I originally entered HSA contributions, the amount owed went up and did not go back down when I entered that the HSA funds were used for medical expenses only. From everything I'm reading, the system should correct at this point, but it is not in our case. Do you know why we would owe more with a contribution to an HSA account?

[AmyC]

Check that you have the required HDHP marked for self or family coverage and the months. HSA requires HDHP insurance.

See What are HSA-eligible plans?