I have a question. I contribute to a HSA account through my employer in 2022. Each week there a payroll deduction for my HSA contributions to my account. My employer also contributes a small amount as well. On my W2, box 12 shows code W and the amount is $1500. I went through my pay stubs and my HSA contributions for the year was $1000 and my employers HSA contribution was $500.00. I also received Form 5498-SA and line 2 has the total amount of $1500.00 for total amount contributed in 2022.
My question is would I put my $1000 on line 2 on Form 8889 and on line 9 for employers portion would be $500.00 so I can get the possible HSA tax deduction on my tax return.
I also had a HSA distribution in 2022 for $1000 but that all went medical, so I know that amount is not taxable income.
thank you in advance for your assistance.
Don't enter any additional contributions in the HSA section. The code W amount (you and your employer's contributions) will be transferred to form 8889 automatically when you enter your W-2. That money is already tax-free. Don't enter anything from Form 5498; keep that with your tax records. And yes, when you enter your distribution and indicate it was all used for medical expenses, it will not be taxed either.
okay. so since it's already tax free from my payroll check, I don't get the HSA deduction on my tax return, is that correct?
And if I contributed to an HSA account that wasn't tax free, than my amount would have gone on line 2 on Form 8889?
Trying to understand how some individuals qualify for HSA deductions on their tax returns while others don't.
I certainly don't want to take any additional deductions prematurely.
thank you
That is correct. Since the Health Savings Account (HSA) was funded through payroll deductions using tax-free money, it is not deducted on your tax return.
If you had made any additional contributions to the HSA account on your own with after-tax money, then that amount would be entered into your return as an additional contribution and it would be reported on Form 8889 line 2 and also Form 1040 Schedule 1 line 13.
Be aware that if you have not already reached your maximum HSA contribution limit that you can make a contribution to the account for 2022 before the tax due date and take the deduction on your 2022 return.
thank you for replying. Sort of confusing. But now I totally understand. I know some of my co workers who have had their tax returns prepared by a CPA or a tax preparer and had taken the HSA deduction. Their tax preparer says its okay. And they are adding in by their payroll only like I am.
Anyways... not my business what they do. I just want to do what is right.
I rather take the extra steps to read the instructions and ask questions.
Thanks again.