My refund went down when I entered my HSA information. It seems like it’s getting taxed as income. Can any help me understand this?

[jeffrey.storm@pr]

I used this only for medical expenses and did not over contribute.

[BillM223 · Accepted solution]

The IRS assumes that HSA contributions are income until you prove that you had qualifying HDHP coverage. The IRS also assumes that your HSA distributions are taxable until you prove that they were for qualified medical expenses.

Thus when you enter your W-2 with the code W (HSA contributions), the code W amount is added to income until you go through the HSA interview and complete it. When you tell TurboTax that you had HDHP coverage, the income will be removed. Ditto with the HSA distributions.

Just make sure that you go through the HSA interview to the end, and stop watching the Refund Meter so closely. You'll be OK.

[Andy1010]

This is not correct resolution.  Company/Employer contribute to HSA only IF employee is enrolled in HDHP plan.  Why TurboTax forcing to go through questions?  Employer already coded as Box 12 - W.  Meaning not taxable income.  Period.  How do I fix this in TurboTax?  Manual edit is not allowed. 

My situation is as below.

I am in HDHP and employer contributed to my HSA 1000 with box-12, W code.

I did not contribute any dime myself into HSA.

I have last 4 months of the year 2024 with the employer(1st job).  Prior to that I am a student with Parent's plan (COBRA ) for whole year 2024.  Overlap insurance.  Parent's dropping me does not save single dollar in premium hence I am on both Health Insurance plan.

Parents don't contribute to any HSA at all since last 10 years.

My parent calming me as Dependent - Year 2024 as I was in last year of college and supported by them.

TurboTax simply calculating Employer contribution as overpayment and considering as income and hence my tax is higher now. 

Hi TurboTax team - Could you please help ASAP to manually correct it on my locally installed TT Delux?

[RobertB4444]

If you are claimed as a dependent on someone else's tax return you are not allowed to have an HSA or contribute to it.  That is why it is taxable income.  You should take the $1000 back out of the HSA.

@Andy1010