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What is Form 8889?

by TurboTax•2254• Updated 1 month ago

Form 8889 is for people with high-deductible health plans to report Health Savings Account (HSA) contributions and distributions on their federal tax returns.

TurboTax will automatically fill out Form 8889 if you:

  • Contributed to an HSA
  • Carried over a prior-year excess contribution
  • Took a distribution
  • Inherited an HSA

The HSA section can be found in TurboTax under both Wages & Income and Deductions & Credits.

Contributions to an HSA are usually facilitated by your employer’s payroll department. These contributions are made with pre-tax dollars and reported on your W-2 Box 12  Code W.
Contributions can also be made:

  • As a Qualified HSA Funding Distribution from a retirement account
  • As a rollover from a different HSA
  • By direct funding

To contribute to an HSA, you must also participate in a High-Deductible Health Plan (HDHP). The yearly limit for contributions depends on several factors, including your age and the dates of HDHP coverage.

  • If your household is covered under a family HDHP, each spouse may have their own HSA and share the combined yearly limit, but only eligible taxpayers can use the “catch-up” contribution. 

Note: You may receive Form 5498-SA from the Health Saving Account Plan administrator or your employer. The information on this form is not entered directly into TurboTax. 

Excess contributions

TurboTax will calculate if you made excess contributions. If you did, TurboTax will generate Form 5329 to report the excess contributions as well as the additional 6% tax. The tax on excess contributions and earnings will be applied year after year until corrected.

A correction can be made by:

  1. Immediately removing the excess as a distribution. You must report this amount distributed as not being used for medical expenses, or
  2. Including the excess contributions and earnings in the following year's tax filings.
  • Distributions from an HSA are reported on Form 1099-SA. If the money was all used for qualifying medical expenses and/or rolled over to another HSA or MSA in your name, the distribution is not taxed. There’s no time limit as to when the distributions can be made, but they are reported in the tax year they were taken.
  • Non-qualifying distributions are distributions made for reasons other than qualified medical expenses and can generate a 20% tax penalty.
    • It may be possible to return a disqualifying distribution to the account if the HSA administrator allows it. 
    • There is no penalty tax on distributions once the account owner turns 65 or becomes disabled. 
  • An inherited HSA  is reported on Form 1099-SA (code 4 or 6, but may be code 1 if the beneficiary is the spouse).
    • If inherited by a spouse, the HSA becomes their account. 
    • If other than a spouse, the distribution is reported as income for the beneficiary.