Form 8889

[madrcs]

Through payroll  deduction I put $4100 into my HSA through the entire year of 2023. My employer contributed $750. I believe I did not fill out Form 8889 correctly because I was not able to deduct the $4100 that I contributed on line Schedule1, Part 2, line 13. How can I correct this?

[Opus 17]

All money contributed by payroll deduction is considered an "employer" contribution, because the tax laws treat it that you agreed to a voluntary salary reduction that your employer contributed for you.  All employer contributions (your own voluntary salary reduction plus any free money) is listed in box 12 of your W-2 using code W.  The contributions are also already subtracted from your box 1 taxable wages.  You can't take an additional tax deduction because you already aren't paying income tax on the money. 

The contribution limit for 2023 was $3850 for single coverage or $7750 for family coverage, plus $1000 catch-up if you are age 55 or older. You could contribute $4850 if you had single coverage and were over 55, or you had family coverage.  If you had single coverage and were under age 55, you had an excess contribution and should have paid a penalty and some income tax. 

[madrcs]

Is an FSA handled the same way?

[Opus 17]

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@madrcs wrote:

Is an FSA handled the same way?

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Any money you set aside for an FSA is subtracted from your box 1 wages, so it is not taxable.   Otherwise, it is ignored on your tax return.  It is not reported anywhere (including your W-2), and you don't report expenses that were reimbursed from the FSA.

However,

if you are covered by an FSA, you are ineligible to contribute to an HSA, even if you are enrolled in a qualifying HDHP.  An FSA counts as "other medical coverage" that disqualifies you from contributing to an HSA.   Ineligible contributions must be removed and added back to your income tax, or are subject to tax and a penalty for every year they remain in the HSA.