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brandoncwiley
New Member

When I input my Gross distribution from my HSA it decreases my refund, even after I click the box stating all of the distribution was used for qualifying medical expenses.

 
1 Reply
BMcCalpin
Level 13

When I input my Gross distribution from my HSA it decreases my refund, even after I click the box stating all of the distribution was used for qualifying medical expenses.

The understandable confusion is rooted in the fact that the IRS believes that all HSA contributions and distributions are taxable until a completed form 8889 is provided. TurboTax has to follow this same methodology.

So what happens is that when you enter distribution from the 1099-SA, the program thinks at first that this amount is taxable, because there is no completed form 8889 yet.

Form 8889 is completed by TurboTax when you go all the way through the HSA interview.

When you complete the interview, form 8889 is finally complete, and then TurboTax can treat the distribution as non-taxable after all, so your tax due decreases or your refund increases.

Be sure you go all the way until you are returned to the Your Tax Breaks screen.

This is a good reason to not watch the refund amount too closely from screen to screen. Sometimes TurboTax has to make changes to the tax due out of sync with the page that you are on, but several (or many) pages later.

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