Initially said I had to pay a fee for HSA, but after some questions seems like the fee went away and my refund increased by 1000 or more, and I want to make sure was OK

[tallprsn]

my employer contributed 750, i think, but then I maxed it out myself.

[BMcCalpin · Accepted solution]

The way an HSA works is that your and your employer's contributions to the HSA are tax-free, up to the annual limit. In addition, distributions (i.e. payments made from the HSA) are also tax-free, if they were for qualified medical expenses.

To report the contributions to and the distributions from an HSA, you file a form 8889 with your tax return. TurboTax will do this automatically - but you need to complete the HSA interview.

The reason is that if the form 8889 is not completed, then distributions will show up on the return as taxable. In the normal course of entering data in the HSA interview, there is a period of time in which your tax due seems higher than it should, because either the tax-free contributions or the tax-free distributions are being taxed.

However, when you complete the HSA interview - especially answering the question "were all the distributions for qualified medical expenses?" - the tax-free nature of the contributions and distributions is restored and the tax due drops (or the refund increases).