When i select that i had a high deductible health plan (HDHP), the amount of tax I owe is lower, why is that the case?

[jatoc]

Trying to understand what triggers a lower tax bill by selecting HDHP. How can I check the amount reduced makes sense?

Thank you

[AnnetteB]

Do you have an amount on your W-2 in Box 12 with a Code W beside it?

[jatoc]

Yes

[AnnetteB · Accepted solution]

The reason for the change that you saw on your return when you entered that you had a HDHP is due to the HSA contribution that is included on your W-2 and the order that the information is entered into TurboTax.

Entering information into your return regarding HSA contributions is a two-step process.  Each step is likely to cause the refund/balance due number to change because TurboTax constantly updates the calculations as you go through the return. 

The first step occurs when you enter your W-2 that includes contributions to the HSA.  After entering the information from your W-2, the amounts contributed to the HSA are included in your income as an excess contribution (thus causing a higher balance due or lower refund). 

Then, the second step is to verify your eligibility to contribute to the HSA due to coverage under a High Deductible Health Plan.  This results in the HSA contribution being removed from income since you were eligible to make the contributions.  Therefore the balance due amount will drop or the refund amount will increase.

[jatoc]

Thanks very helpful. Now that I know this, how can I check if I did it right in 2017 and 2016 using TurboTax? is there something in form 8889 that will tell me if I did select that i have a HDHP back then? wondering if I missed this before.
Thanks

[AnnetteB]

Form 8889 line 1 has a check box to indicate in what type of HDHP plan you are enrolled.