HSA Contribution showing as other income

[JEOC513]

My son is a recent college graduate that contributed to his HSA account in 2019.  In the personal information portion of Turbo Tax, he answered that he was at least a part-time student in 2019, and that someone else can claim him as a dependent, but they will not.  His HSA contribution of $800 in 2019 is showing as other income.  Since he is not listed as a dependent on his parents taxes, should the $800 HSA contribution show as other income on his return?

[BillM223 · Accepted solution]

No, the rule is you are not eligible to make HSA contributions so long as you COULD be claimed as a dependent, not whether or not you actually are a dependent on another return.

This fact is not particularly clear when reading IRS Publication 969 about HSAs, but a look at the underlying US Tax Code (section 223(b)(6)) reveals that it is true:

(6)Denial of deduction to dependents

No deduction shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins.

The meaning hinges on the word "allowable" as opposed to actually claimed. Section 151 is the section describing the allowance of exemptions for personal exemptions, which is where the exemption for dependents is discussed. Yes, this is so even though the exemptions have been set to zero for the next few year; the definitions still survive.

[JEOC513]

Thank you for your help!