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willamsondeb
New Member

Why is my 1099-SA reimbursement for previous years medical subtracted from my current 2020 medical expense since I am trying to itemize vs using standard deduction

I am retired and have an HSA and this year I requested reimbursements for previous years qualified medical expenses.  It is not for reimbursement of current year medical expenses that I wanted to use to itemize vs standard deduct.  Turbo assumes i was reimbursed current year medical (not previous years) and subtracts from current year medical expense.   
But
2 Replies
BillM223
Expert Alumni

Why is my 1099-SA reimbursement for previous years medical subtracted from my current 2020 medical expense since I am trying to itemize vs using standard deduction

Yes, this is a peculiarity of the IRS rules that say that you can take HSA reimbursements for prior year medical expenses (so long as the expenses were incurred after the date that the HSA was credited). They really didn't design Schedule A to accommodate this.

 

In this case, enter a miscellaneous medical deduction (at the end of the Medical and Dental interview) called "Adjustment for prior year HSA distribution" and enter the dollar amount of the amount HSA distribution for the prior year expense. This will return your total medical expenses to the correct number as if the HSA distribution was not subtracted out.

 

This will not print on Schedule A so  just make a note to yourself why you did this and save it in your tax file if anyone ever asks (unlikely).

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Opus 17
Level 15

Why is my 1099-SA reimbursement for previous years medical subtracted from my current 2020 medical expense since I am trying to itemize vs using standard deduction

I disagree with Bill that the problem is the IRS. The problem is TurboTax, which assumes that taxpayers are idiots.  TurboTax doesn’t just ask you to list all of your deductible medical expenses. TurboTax asks you to list all of your medical expenses, and then to list all of your tax free reimbursements such as health insurance, and then TurboTax automatically subtracts your HSA reimbursements whether they were for the current year or not, and then TurboTax does the calculation to determine the remaining amount of medical expense deduction.

 

I agree that the remedy is to add an additional medical expense to offset the amount of the HSA reimbursements that were for prior year medical expenses.

 

However, if you took a tax deduction for those medical expenses in the prior year and received a tax benefit from the deduction, the fact that you are now obtaining reimbursement from an HSA makes the HSA reimbursement taxable income to you as a taxable recovery, which is another name for a reimbursement of a previous deduction.  You can’t both take a tax deduction for an expense and also be reimbursed tax free for that expense, even if the reimbursement crosses a tax year.   If you must enter the reimbursements as a taxable recovery, that is under the “other income“ or “uncommon income“ section of the program.  If you did not take a tax deduction for your medical expenses in the previous year, then you do not have a taxable recovery.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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