HSA Contributions/Deductible/Not Deductible

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
GiannaLuna
Posts: 42
Joined: Sat Dec 03, 2016 12:33 pm

HSA Contributions/Deductible/Not Deductible

Post by GiannaLuna » Sat Oct 12, 2019 2:49 pm

I've been helping my brother straighten out his finances. Today, at his request, I looked through his 2018 tax return and noticed he took a deduction for his 2018 HSA contributions. He is off now tracking down a copy of a pay stub..(amazing how these things are no longer easily available, particularly when the system to re-set his password on the payroll system is wonky today.)

Nevertheless, I am betting his employer swept his pre-tax HSA contributions into the HSA account and therefore he is now in a situation of having taken a deduction he is not eligible for.

If so, should he just amend his return? Thanks

User avatar
RickBoglehead
Posts: 4091
Joined: Wed Feb 14, 2018 9:10 am
Location: In a house

Re: HSA Contributions/Deductible/Not Deductible

Post by RickBoglehead » Sat Oct 12, 2019 2:53 pm

Yes. Exactly.

Bit why do you think he cannot deduct them?

An HSA may receive contributions from an eligible indi-
vidual or any other person, including an employer or a
family member, on behalf of an eligible individual. Contri-
butions, other than employer contributions, are deductible
on the eligible individual’s return whether or not the indi-
vidual itemizes deductions. Employer contributions aren’t
included in income.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

MotoTrojan
Posts: 6158
Joined: Wed Feb 01, 2017 8:39 pm

Re: HSA Contributions/Deductible/Not Deductible

Post by MotoTrojan » Sat Oct 12, 2019 3:07 pm

Hmm interesting for me. Did HSA for 1st time. Contributed $1000 myself (started part way through) and using company contributions for rest. Looking forward to more info!

Topic Author
GiannaLuna
Posts: 42
Joined: Sat Dec 03, 2016 12:33 pm

Re: HSA Contributions/Deductible/Not Deductible

Post by GiannaLuna » Sat Oct 12, 2019 3:11 pm

Well, it looks like his employer sent $300 a month directly to his HSA bank account, taking this from his pay, so these are his contributions, not contributions made on his behalf by the employer.

fh2000
Posts: 109
Joined: Thu Sep 02, 2010 7:18 pm

Re: HSA Contributions/Deductible/Not Deductible

Post by fh2000 » Sat Oct 12, 2019 3:24 pm

GiannaLuna wrote:
Sat Oct 12, 2019 3:11 pm
Well, it looks like his employer sent $300 a month directly to his HSA bank account, taking this from his pay, so these are his contributions, not contributions made on his behalf by the employer.
HSA contribution limit for 2018 is $3,450. Monthly deduction should be $287.50. Normally the amount deducted from payroll is selected by participant when signing up a HDHP HSA eligible health insurance from open enrollment period. Did he select such plan during open enrollment period for 2018? And, does he have a HDHP HSA eligible health insurance this year?

TropikThunder
Posts: 1750
Joined: Sun Apr 03, 2016 5:41 pm

Re: HSA Contributions/Deductible/Not Deductible

Post by TropikThunder » Sat Oct 12, 2019 3:48 pm

GiannaLuna wrote:
Sat Oct 12, 2019 3:11 pm
Well, it looks like his employer sent $300 a month directly to his HSA bank account, taking this from his pay, so these are his contributions, not contributions made on his behalf by the employer.
Careful there. If the HSA contributions were made via payroll deduction, they would not have been included in his W-2 box 1 wages so therefore would have already been excluded from income (already deducted). One cannot then also take a deduction on Schedule 1 for the same dollars.

If one funded an HSA using net income (i.e., from a checking account) that can be deducted on Schedule 1.

User avatar
Artful Dodger
Posts: 747
Joined: Thu Oct 20, 2016 12:56 pm

Re: HSA Contributions/Deductible/Not Deductible

Post by Artful Dodger » Sat Oct 12, 2019 7:59 pm

TropikThunder wrote:
Sat Oct 12, 2019 3:48 pm
GiannaLuna wrote:
Sat Oct 12, 2019 3:11 pm
Well, it looks like his employer sent $300 a month directly to his HSA bank account, taking this from his pay, so these are his contributions, not contributions made on his behalf by the employer.
Careful there. If the HSA contributions were made via payroll deduction, they would not have been included in his W-2 box 1 wages so therefore would have already been excluded from income (already deducted). One cannot then also take a deduction on Schedule 1 for the same dollars.

If one funded an HSA using net income (i.e., from a checking account) that can be deducted on Schedule 1.
Yes, this us the crux of the matter. The advantage of running your HSA contributions through your employer is they usually deduct them via a section 125 plan in which you reduce your gross pay by the HSA contribution. This provides the normal federal and state tax deduction and also reduces your FICA (7.65%) payroll tax. So, yes, if his employer has reduced his taxable wages by the $300 monthly contribution, he is double dipping.

Spirit Rider
Posts: 11510
Joined: Fri Mar 02, 2007 2:39 pm

Re: HSA Contributions/Deductible/Not Deductible

Post by Spirit Rider » Sat Oct 12, 2019 10:04 pm

Any amount of his HSA contributions reported on his W-2 Box 12 as Code W are not deductible, because as pointed out they already were reflected in reduced W-2 Box 1 wages. If he deducted them and they were reported on his W-2 Box 12 Code W, he needs to amend his return by 10/15 (Tuesday).

The only way he would have been able to deduct this. Is the slim chance that these were not section 125 salary reduction contributions, but rather after-tax direct deposits from his net pay directly to his HSA routing and account numbers.

Post Reply