PA-40, Schedule O - HSA Contribution

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How do you enter HSA Contributions in Turbo Tax State for Pennsylvania, I can't access Schedule O to do it and the software doesn't recognize its entered for Federal Income purposes?

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BillM223

Level 15

How did you enter the HSA contributions on the federal return? Normally, you would do it using code W in box 12 on your W-2, or if you made direct contributions, you would enter them in the HSA interview.

Are you saying that you didn't enter the HSA contributions in either of these two ways?

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rwengelAuthor

Level 2

I did enter via W2, Box 12 Code W, I thought that should trigger Schedule O at PA-40, however later discovered that payroll deduction HSA is likely deducted for State Income tax as well and adding such to PA-40, Schedule O would be redundant. Am I understanding that correctly?

BillM223

Level 15

The only difference between federal and Pennsylvania law on reporting HSA activity is that HSA distributions for expenses other than qualified medical expenses are not subject the the 20% penalty in Pennsylvania like they are on the federal return.

It appears, though, that PA does not start with federal AGI (which would have the HSA contributions already removed), but lists gross income amounts then subtracts the few deductions that are allowed (hence Schedule O). However, the PA instructions for the PA-40 don't mention HSAs one way or the other.

As you know, the code W amount in box 12 of your W-2 is removed from Wages in boxes 1, 3, and 5 on your W-2 before your W-2 is printed. This means that if PA uses the Wages amount as "gross compensation" on line 1a of the PA-40, then the HSA contributions are already removed from PA income and therefore should not be listed on Schedule O as a deduction. But if line 1a includes Wages plus the code W amount, then the HSA contributions should appear on Schedule O.

I don't have a test for this at the moment, so if you can see your PA-40 to see where line 1a on the PA-40 comes from. If you can't determine it, come back and let us know.

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