Turbotax listed my medical expense payments from the HSA as income, but they should have been tax exempt. What am I doing (or understanding) that is incorrect?

[pbyrd78]

I thought that an HSA account allows you to put pre-tax dollars in an account, and then when you need to spend money on legitimate medical expenses, you could use those pre-tax dollars (and never pay tax on them).  When I entered the data from my 1099SA into TurboTax, it corrected reduced my income by the amount of the full contribution.  But then it added back in as income the amount I spent from my HSA for that year - thereby negating the "tax advantaged" nature of using the HSA for medical expenses.  Am I not doing something correctly when I am entering the data from the 1099SA form?

[Critter · Accepted solution]

You entered the distribution but did you also mention that you used it all to pay qualified medical expenses in that section ?  If not go back and review your entries...

You'll get Form 1099-SA if you used funds in your Health Savings Account (HSA) or a Medical Savings Account (MSA) to pay for health care expenses.

Tip: Don't confuse this form with the SSA-1099 for Social Security benefits.

Enter your 1099-SA before your medical expenses, so we can properly calculate your medical expense deduction:

1. Open (continue) your return in TurboTax, if you don't already have it open.
2. In TurboTax, search for 1099-sa or 1099sa (don't use the upper-case "SA") and then click or tap the "Jump to" link in the search results.
3. On the Tell us about the health-related accounts screen, check the appropriate boxes (these may already be checked from info you entered earlier).
4. Click or tap Continue and follow the onscreen instructions to add or edit the form.
   • Answer Yes if asked if you used your HSA or MSA to pay for anything.
   • If using Federal Free Edition, follow the prompts to upgrade to Deluxe.

Related Information:

• Where do I enter an SSA-1099, SSA-1099-SM, or SSA-1099-R-OP1?
• Where do I enter my medical expenses?

GEN12227

Answered by TurboTax FAQ to this question